Episode 32: Can I Reduce Taxes On My Social Security?
Have your question answered on the Money Wisdom Question Series!
Thank you for joining us for Episode 32 of our Money Wisdom Question Series, where we answer common financial and retirement investment questions. Today’s question is, “Can I reduce taxes on my Social Security?”
Your Social Security Taxes Depends on a Formula
The simple answer is yes, you can reduce taxes on your Social Security. However, you might not want to because of what it entails. The amount of taxes that you pay on your Social Security is dependent on a formula that takes into account your other income. This could be investment or earned income or K-1 income from a partnership that you’re a part of. Any other type of income is going to go into this formula that says whether you can increase or decrease taxes on your Social Security.
It Is All Dependent on Your Other Income
Now, here’s the trick. You can get zero taxes on your Social Security if you don’t have other income or if you have a small amount of other income. Some people say, “Well, I want $10,000 a month to live on.” You can still reduce your, quote, “income”. How can you do that? Let’s pretend I had $500,000 in the bank and I’ve already paid taxes on that money. If I live off that cash flow, if I start drawing down $10,000 a month, that does not show up as income on my tax return. So, if I’m doing that, I have no other income.
Let’s say I leave my retirement money alone completely. Maybe I’m under 72 and I don’t have to take any retirement money out. I could actually use bank money that I’ve already paid taxes on and take my Social Security taxes and take them to zero. I get to keep my entire Social Security check.
The Bottom Line
I know I got a little technical there, but the bottom line is you can reduce taxes on your Social Security income, but you have to manipulate, for lack of a better word, your overall taxable income.
The formula that decides how much money you’ll pay in taxes on Social Security is part of your tax return. They take something called provisional income and that’s what you want to reduce. It gets a little technical, but it’s simpler than you think.
I want to prompt your mind to be thinking about that because you should be dealing with a financial planner that is helping you reduce taxes in all different areas.
Thanks for joining me and I hope you found this information helpful!
P.S. If you enjoyed this topic and want to learn more, download our offer, “Are You Paying Too Much in Taxes in Retirement?”
P.P.S. Feel free to submit questions here for a chance to have them answered!
Information presented in our podcasts is considered current as of the created date. Over time, some information presented may become stale. We recommend you consult with your Financial Professional before making any changes based on information contained here.
Johnson Brunetti is a marketing name for the businesses of JB Capital and JN Financial.
Investment Advisory Services offered through JB Capital, LLC. Insurance Products offered through JN Financial, LLC.
The guarantees provided by any type of insurance contract are based on the claims-paying ability of the insurance company.
Related Resources
-
How Do I Get Out of Debt Fast?
Most people with debt want to get out of it quickly and efficiently. To do that, you first need a clear understanding of your financial situation. Second, you need a clear, actionable plan. In … -
Why Do I Need to Account for Inflation in Retirement?
Today’s question is: What is inflation and why is it important to account for in my retirement plan? Inflation is the rising cost of goods over time. Meaning, it will cost you more money next year… -
How Does a Tax Return Work?
As tax season concludes, it’s a good time to refresh your tax knowledge. In this week’s Money Wisdom Question Series, Ian Fergusson, RICP® discusses how filing your taxes works and why it’s essen… -
What Is a Fiduciary?
When it comes to managing your money, trust is everything. That’s why today’s question is one of the most common and important ones we receive: What is a fiduciary? In this week’s Money Wisdom … -
Most Asked Social Security Questions
It’s no question that Social Security plays a crucial role in retirement planning, helping to provide a stable income stream for millions of recipients. In this week’s Better Money Boston with … -
Can I Get ‘Out’ of a Fixed-Rate Vehicle?
When you lock into a fixed-rate vehicle like a CD, fixed annuity, or fixed-indexed annuity, you’re committed to a specific interest rate for a set period. But what happens when after a few years, … -
Are You Paying Too Much in Taxes in Retirement?
You’ve worked hard to build your retirement savings, but have you thought about how much of it you’ll get to keep after taxes? Unfortunately, many retirees pay more in taxes than they expected sim… -
Are My Social Security Benefits Taxable?
If your total combined income exceeds certain thresholds, up to 85% of your Social Security benefits may be taxable. Understanding how Social Security is taxed can help you make informed decisions… -
Right Time for Social Security
Contrary to popular belief, waiting to claim Social Security until age 70 to get the maximum benefit is not the best decision for everyone. So, when is the right time? In this week’s Retire Wis… -
What is the Social Security Fairness Act?
You may have heard about the Social Security Fairness Act, which was signed into law on January 5, 2025. But what is it and who does it help? In this week’s Money Wisdom Question Series, Ian Fe…
