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Taxes on Social Security Benefits and How to Avoid Them | SB Elder Law

Posted by Julianna Malis | Jan 11, 2022 | 0 Comments

An article on kiplinger.com offers some strategies to avoid, or at least mitigate, taxes on Social Security benefits. Attorneys at Santa Barbara Estate Planning can also help you with these sorts of issues by helping you set up a special Trust. Please call us with your questions at (805)946-1550.

Withdraw money from your tax-free Roth IRAs. 

Tax-free withdrawals from a Roth IRA or Roth 401(k) are not included in your adjusted gross income. Rolling over money from your traditional IRA or 401(k) to a Roth IRA years before you start receiving Social Security benefits is an excellent way to avoid taxes later in retirement. Of course, you will have to pay income taxes when you make the conversion, but you can tap the account tax-free after that.

Purchase a Qualified Longevity Annuity Contract.

You can invest up to $130,000 from your IRA or 401(k) in a deferred-income annuity called a Qualified Longevity Annuity Contract (QLAC). The money in your QLAC is ignored when figuring your required minimum distribution, so you can reduce the size of your distribution, lower your income and cut your tax bill. 

Give your required minimum distribution to charity.

If you are 70½ or older, you can give up to $100,000 per year to charity from your IRAs tax-free. Your gift counts as the required minimum distribution but is not included in your adjusted gross income.

Be careful with income investments.

You can structure your portfolio to minimize the income it generates. This approach makes particular sense if your portfolio's income is being reinvested. 

To learn more, you can read the entire Kiplinger article at http://www.kiplinger.com/article/retirement/T051-C001-S003-how-to-limit-taxes-on-social-security-benefits.html?rid=SYN-yahoo&rpageid=15173&yptr=yahoo. You can also schedule a strategy assessment meeting with our attorney by calling (805)946-1550.

About the Author

Julianna Malis

Julianna Malis, Attorney at Law, LL.M (Taxation-Estate Planning) Julianna helps families stop worrying about the ‘what ifs’ in life, and instead prepare for life events through proper estate planning. As the founder of Santa Barbara Estate Planning Law Group, she brings a family-centered approach to planning, with a focus on practical solutions for families and high net worth individuals...

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