Can I Really Avoid Income Tax On Social Security?

Theres no arguing that taxes on social security are incredibly high. As a matter of fact, according to current tax law, up to 85 percent of a persons Social Security income is taxable when their total threshold income exceeds a set limit. What is threshold income?

Threshold income is the governments formula for determining how much of a persons Social Security is taxable. It is calculated by adding half of a persons Social Security income with any other income they may have. The following threshold limits determine how much of a persons Social Security is taxable:

A single person with $25,000 to $34,000 in threshold income: 50 percent of Social Security is taxable.

A single person with more than $34,000 in threshold income: 85 percent of Social Security is taxable.

A married couple with $32,000 to $44,000 in threshold income: 50 percent of Social Security is taxable.

A married couple with more than $44,000 in threshold income: 85 percent of Social Security is taxable.

Although it may seem inevitable that youll be forced to pay these steep taxes, there are ways to reduce or even avoid them altogether.

Fixed annuities: The perfect tax reduction solution. If youre retired, you may be drawing income from interest-producing assets such as CDs and taxable bonds. However, if you dont need this income for daily living expenses, you should consider transferring the funds to a fixed annuity.

Why? First of all, fixed annuities offer tax-deferred interest. Additionally, fixed annuities are the only interest-producing assets that the government does not include in their threshold income calculations which means investing your money in a fixed annuity actually helps to lower your threshold income. As a result, youll be able to decrease or even eliminate income tax on your Social Security income.

Based on current tax law, the IRS includes the following sources of income when calculating your

threshold income:

Pension
Mortgage income
US Treasuries
CDs
Money Market Accounts
Passbook savings
Credit Union savings
Dividends from stocks
Dividends from mutual funds
Capital gains
Municipal bonds
Annuity withdrawals

As you can see, fixed annuities are not included in this list of assets, which is a huge advantage over these other investment vehicles.

Whether you want to ensure youll have enough income to last you through the years or youre looking for a way to reduce taxes on your Social Security income, a fixed annuity may be the ideal investment solution for you.

Greg Gregson The IRA Professor Simply Seniors News http://www.SimplySeniorsNews.com

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