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Slash retiree taxes on Social Security benefits

by on
in Small Business Tax,Small Business Tax Deduction Strategies

Don’t expect the taxman to go easy on you in retirement. When you start collecting Social Security retirement benefits, up to 85% of the benefits may be taxable.

Strategy: Be proactive about taxation of Social Security benefits. Depending on your situation, you can use one or more of the four strategies below to reduce or eliminate tax liability.

There is a common denominator. Each of the strategies is aimed at limiting your “provisional income” (PI) for Social Security purposes.

How it works: PI is an awkward tally of adjusted gross income (AGI); tax-exempt interest income; and one-half of the Social Security retirement benefits received. For example, if someone’s AGI for 2010 is $100,000; municipal bond income is $5,000; and Social Security benefits are $20,000, the PI is $115,000. What often confuses taxpayers is the inclusion of interest income that is otherwise tax-exempt in the PI computation.

The higher the PI, the greater t...(register to read more)

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