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How to lower the chances you’ll pay taxes on Social Security

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Question: Tom and Anita from Springdale: How can we reduce the chances that we will have to pay taxes on our Social Security benefits?

A: First of all, we are glad that you recognize that there is a chance that your benefits will be taxable – because not everyone knows this, although, according to the Social Security Administration, 40% of beneficiaries have to pay a certain amount of federal taxes.

Currently, if you are married and filing taxes together, your ‘temporary income’ (adjusted gross income + non-taxable interest + half social security benefits) must be less than $ 32,000 to pay zero tax on your benefits. If this number is between $ 32,000 and $ 44,000, you will pay federal taxes up to half of your fees; and you will be liable to tax up to 85% of your fees if your temporary income exceeds $ 44,000. So the key to reducing the chance of not paying taxes at all comes down to staying below that $ 32,000 threshold.

Amy Wagner and Steve Sprovach, Allworth Advice

How can this be achieved? Consider: Reduce your taxable income by withdrawing funds from a tax-deferred account (like an IRA) after age 59, but before you start applying for Social Security; use of the Roth IRA and / or Roth 401 (k) because withdrawals from these accounts are not counted as taxable income; and / or after you turn 70 ½, make a Qualified Charitable Distribution (QCD) directly from the IRA to your favorite charity, instead of taking the distribution and printing a check.

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