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Your Social Security benefits can be taxed.

Another tax item to keep in mind during retirement is that your Social Security benefits can be taxed at ordinary income tax rates as well, depending on your provisional income. Provisional income includes practically every source of income such as:

§  Wages

§  Pensions

§  Annuities

§  Dividends

§  Investment returns

§  Interest from tax-exempt bonds

§  50% of your Social Security benefit

For example, a married couple with an annual income between $32,000 and $44,000 would pay income tax on up to half of their Social Security benefits. The chart below shows provisional income levels and the percentage of Social Security benefits taxed for both single taxpayers and for married taxpayers filing jointly.

It's important to be aware of these thresholds, especially if you are near the $34,000 (for single filers) or $44,000 (for married filers) levels. There are planning strategies available to help reduce the tax burden on your Social Security benefits. If you think you might fall near either of these Income thresholds, working with a financial advisor and/or a tax specialist now can help you put beneficial strategies in place for the future.

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