4 Tips to Minimize Taxes on Social Security in Retirement

(don’t forget to checkout the video too)

Retirees that are able to collect their social security tax-free have their retirement income last 5–7 years longer on average.

It’s not always possible collect social security tax-free and achieve a fully tax-free retirement but it is certainly something to strive for.

Here are 4 tips that can help you minimize (and maybe eliminate) the taxes on your social security in retirement:

✅ Know social security income limits

Social is taxed based only on “provisional income”.

But, what is provisional income⁉️

Provisional income is calculated as your AGI (adjusted gross income) + non-taxable interest you earn + 1/2 of your social security benefit (see below):

Single/Head of Household/Widowers:

🔵 less than $25,000 of provisional income = 0% taxable social security

⚪️ $32,000 to $34,000 = up to 50% taxable social security

🔵 More than $34,000 = up to 85% taxable social security

Married Filing Jointly:

⚪️ Less than $32,000 of provisional income = 0% taxable social security

🔵 $32,000 to $44,000 = up to 50% taxable social security

⚪️ More than $44,000 = up to 85% taxable social security

✅ Consider a Roth conversion

Withdrawals from Roth sources are completely tax-exempt.

Withdrawing money from Roth sources also does NOT count as provisional income!

If you are able to reposition some of your taxable money into Roth IRA’s prior to collecting social security you may be able to collect your entire social security check tax-free

✅ Make qualified charitable distributions (QCDs)

You can donate money directly to a charity of your choice to reduce your taxable retirement income, which can also lower your social security taxes.

✅ Delay Your Benefits

If you have additional sources of retirement income then spending some of that taxable money first and delaying social security is often a smart strategy.

This reduces the balance of your taxable assets (which can help lower your future provisional income and social security taxes).

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