When you’re receiving Social Security benefits, it’s easy to think that the money is completely tax-free. After all, you’ve paid into the Social Security system throughout your career, and the benefits are meant to provide a much-needed source of income during your retirement years. But the truth is that in some cases, you may face taxes on those benefits. If you want to reduce the amount of taxes you pay on Social Security, there are a few steps you can take.
Understanding Social Security and Taxes
AARP reports that while those whose overall income is below a certain threshold don’t have to pay taxes on their benefits, other may have to give back some of what they’ve received. For example, if you are married and filing jointly with your spouse, the combined income of both individuals must be below $32,000 to avoid taxes. That threshold is higher for those filing separately: no more than $25,000.
If your income exceeds either of these thresholds—or if you have taxable interest or other investments—you may owe taxes on your Social Security benefits.
How to Reduce Your Tax Liability
If you do owe taxes on your Social Security benefits, there are several steps you can take to reduce the amount you have to pay. These include:
- Take distributions from tax-free retirement accounts to lower your taxable income
- Donate to charity and take a deduction
- Make tax-deductable contributions to a retirement account
- Defer gig work invoices to the following year
Whether or not you owe taxes on your Social Security benefits, it’s a good idea to understand the process and take proactive steps to reduce your tax liability. Doing so can help ensure that you get to keep as much of your hard-earned money as possible.
The Seniors Center is here to make navigating your benefits a little easier. Follow us on Twitter and Facebook today to learn more about our plan to fix Social Security solvency and improve the program.
