Many people are not even aware of the possible income tax on their Social Security benefits. The tax on Social Security benefits depends on your total income and marital status. Form SSA-1099, which Social Security recipients should receive by January 31, shows the recipient’s total benefits. To determine how much tax you will owe, add 1/2 your SS benefits to all other income, including tax-exempt interest. If this amount is greater than the base amount for the filing status, a part of the benefits will be taxable.
The base amounts that will cause 50% of the benefits to become taxable are:
• $25,000 for single, head of household, or qualifying widow/widower with a dependent child
• $25,000 for married individuals filing separately who did not live with their spouses at any time during the year
• $32,000 for married couples filing jointly
• $0 for married persons filing separately who lived together
But, according to the IRS, up to 85% of the benefits can be taxable if either of the following situations applies:
• The total of one-half of the benefits and all other income is more than $34,000 ($44,000 if married filing jointly).
• You are married, filing separately and lived with your spouse at any time during the year.
THE BOTTOM LINE:
Tax savings should be an important consideration when comparing investments. In the case of immediate annuities, you may find the after-tax return on your money could be greater than what is available from other conservative fixed-income investments. In addition, you can get an income that you can’t outlive.
We can show you ways to cut or eliminate the tax on your Social Security! Call the office for your free consultation!!