Seniors looking forward to next year’s 8.7 percent cost of living adjustment (COLA) in their Social Security benefit should be aware of a possible pitfall. The Motley Fool warns the increase could potentially push your adjustable gross income into another tax bracket.
Depending on the size of your increase, it could wind up subjecting the amount that goes over the threshold to significant taxation. For individuals who exceed $25,000 and couples going over $32,000, up to half the amount could be subject to a higher tax.
Seniors with income that exceeds $34,000 for individuals and $44,000 for a couple could find the excess subject to an 85 percent tax.
However, there are ways to avoid paying more taxes. Those with stock holdings can determine if it might be smart to sell some stocks at a loss to offset other capital gains in order to keep their income under the next threshold.
Some older seniors in their 70s may have to take the required minimum distribution (RMD) from their IRA accounts. Donating that amount to a charity could be a wise thing to do. Another possibility is to buy a QLAC (qualified longevity annuity contract) to defer income until later in life.
Get the Most Out of Your Benefits
Extra income can be a positive thing if it doesn’t create a tax headache. Here at Council of Seniors, we’re working hard to get Congress to pass The SAVE Benefits Act so you can better plan your retirement. This bill is needed to make up for insufficient Social Security cost-of-living adjustments (COLAs) received over a series of years. If we can get it passed, you’ll be reimbursed the $581 that you rightfully deserve.
Please sign our petition today and get others to help too!
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