How to Reduce Taxes on Social Security Income
In the current tough economic conditions, everybody wants to save money. If you are looking to reduce the amount of taxes you are paying each year, you should consider following some simple instructions. People who have retired with fixed incomes are always looking for ways to reduce the taxes they pay to a minimum. There was a time when social security income was used to be tax free but this is not the case anymore. Here are some instructions you must follow in an effort to reduce taxes on Social Security benefits.
Instructions
-
1
Before doing anything else, you will need to know if you should be concerned about this issue. For those with joint total income less than $32,000 at the time of filing taxes or with single income less than $25,000, they do not need to pay any taxes at all on their social security benefits. However, if your joint income was more than $32,000 or single income was more than $25,000, you will be required to pay taxes on your social security income.
-
2
Consider moving any taxable corporate stocks, CD’s, bonds or any other liquid assets to a tax deferred fixed annuity, which is defined as the instrument between you and your insurance company. This will help reduce your annual income considerably as this income will not be counted against you this tax season.
-
3
Next, you can consider selling some of your liquid assets to lower your annual income. These assets can be repurchased later on if needed. This should only be done if you think you are in a lower tax bracket at that time.
-
4
Follow the guidelines and rules provided by the Internal Revenue Services when repurchasing your liquid assets. The interest of a Roth IRA can be withdrawn after years without facing any penalties. Furthermore, you will also be eligible to withdraw the principle without a tax penalty.
-
5
It is recommended to speak to one of the customers services members at the Internal Revenue Service state office by calling the toll free number. Consider discussing your options with the representative. This will help you better understand if you are required to pay the tax on your social security income.
-
6
You can also work for cash to avoid paying heavy social security taxes. However, remember that it is illegal to work for cash in hand.
