The Shocking Reason You Could End Up Paying Taxes on Social Security Benefits
Seniors are often advised to shift toward more conservative investments rather than go heavy on stocks. That's because stocks can be very volatile, whereas bonds offer more stability.
Bonds also offer the benefit of reasonably predictable interest payments, which makes them a suitable investment for retirees. And municipal bonds are a particularly attractive choice for seniors, since they offer the benefit of interest that's always exempt at the federal level. Buy municipal bonds issued by your state of residence, and you can avoid state and local taxes on your interest payments, too.
But while municipal bonds themselves may not raise your federal or state tax burden, they could put you in a position where you end up paying taxes on your Social Security benefits. Here's why.
Source Fool.com
