As seniors file for Social Security benefits, some might not realize their benefits could be subject to federal and state income taxes. The Motley Fool warns that being aware of this taxation can help avoid an unpleasant surprise at tax time.
Here are four things to know about how your benefit can be taxed and how to minimize it:
- The Internal Revenue Service (IRS) has a tax threshold based on your adjusted gross income (AGI), nontaxable interest, and half your benefit amount.
- There are 12 states that tax Social Security benefits, with each having its own set of rules.
- You can avoid taxation by limiting savings withdrawals to reduce your annual income.
- File IRS form W-4V to ask the IRS to withhold part of your benefit in anticipation of what’s taxable.
IRS rules are complex, so it’s worthwhile to consult a tax professional to determine the best strategy to preserve as much of your benefit as possible. An expert can advise you as to what percentage of your benefit may be subjected to taxes if your AGI and other income exceed the tax threshold.
Council of Seniors Wants to Preserve and Enhance Social Security
Additional retirement income won’t necessarily mean you’ll be taxed on it. Council of Seniors is working hard to get Congress to pass The SAVE Benefits Act. The annual Social Security cost-of-living adjustment (COLA) withheld the amount of $581 from seniors. The passage of this bill will ensure the money is returned.
Please sign our petition without delay. Tell friends and neighbors to join in our effort, too! Let’s all work together to give Congress a wake-up call about the growing number of Americans expecting action.
We’d love for you to connect with us on Facebook and Twitter!