Social Security: 3 Ways to Pay Less Income Tax on Your Benefits
Most people collecting Social Security rely on the program for a big part of their retirement income. So it's not surprising that when many hear that the IRS might be in line to take back a portion of their monthly Social Security checks, they're pretty unhappy and ready to do just about anything they can to avoid it.
Not all Social Security benefits are subject to federal income tax; you'll never have to pay taxes on 100% of what you get from the program. Moreover, by taking some prudent steps, you might be able to reduce or even eliminate your tax bill on your Social Security. Later in the article, you'll learn three ways to ease the tax burden on your benefits, but first, here's how Social Security works with income tax rules.
The key to determining whether you'll owe tax on a portion of your Social Security checks is what's called provisional income. Take your gross income, add in tax-exempt interest, and then add one-half of your total Social Security payments for the year. If that figure is above $25,000 for singles or $32,000 for joint filers, you'll potentially owe tax on at least part of what you get from Social Security.
Source Fool.com
