If you’re receiving Social Security benefits, make sure you don’t miss out on potential tax breaks. Even though up to 85 percent of Social Security benefits may be taxable in some cases, there are still plenty of opportunities to reduce your taxes and keep more of your money. Yahoo! Finance recently highlighted five tax deductions for Social Security recipients that can help save some extra cash.
Social Security Tax Breaks
- Make tax-deductible contributions to an IRA. If you’re a Social Security recipient, you can use a tax-deductible Individual Retirement Account (IRA) contribution to lower your cost basis and reduce the amount of taxable income. You can also deduct up to $2,000 each year for making contributions to a traditional or Roth IRA.
- Donate to charity. If you’re forced to take required minimum distributions (RMDs) from your retirement account, donating to a charity can help reduce your taxes. Charitable contributions are deductible and can be used to offset some of the income taxed on Social Security benefits.
- Deduct business and hobby expenses. Some Social Security recipients have a business or hobby that allows them to deduct expenses on their taxes. Just make sure you keep track of all your receipts and itemize your deductions properly.
- Use losses to your advantage. If you have losses from investments that are greater than any gains, you can offset the taxable portion of your Social Security benefits with those losses.
- Utilize elderly tax credits. Taxpayers aged 65 and older are eligible for a number of additional tax credits, such as the Elderly or Disabled Credit, the Retirement Savings Contributions Credit (Saver’s Credit), and the Earned Income Tax Credit. Make sure to research all the available deductions and credits that you may qualify for in order to maximize your savings.
By taking advantage of these five tax deductions, Social Security recipients can keep more of their money and reduce their taxable income. Don’t miss out on the potential savings available to you—make sure to research all the deductions and credits that you may qualify for.
The Seniors Center
The Seniors Center is here to help you better understand Social Security and other retirement-related benefits. We’re working on behalf of retirees by calling on Congress to take action on important Social Security legislation—make your voice heard by signing our online petition today and join our community by following us on Twitter and Facebook.