Not Planning For Taxes on Social Security Benefits
We hate to break it to you, but did you know your benefits could be subject to federal income taxes? In some cases, up to 85% of yours could be subject to taxes, but only if you earn a substantial outside income- most often in the form of dividends and wages.
This percentage is based on your adjusted gross income, nontaxable interest income, and half of your Social Security benefits- basically, your combined income.
Individuals with a combined income between $25,000 and $34,000 will have half of their benefits taxed. Those with a combined income over $35,000 will see 85% of their benefits taxed.
What about joint filers? Well, in that case, half of your benefits will be taxed if your combined income is between $32,000 and $44,000. Again, 85% will be taxed if your combined income is over $44,000.
This is why it’s so important for you to plan around your taxes, too. Some seniors may want to donate to charities once they retire. In that case, consider qualified charitable distributions in order to satisfy your required minimum distributions from an IRA instead of using other funds. These distributions do not add to your taxable income!