Social Security is a key part of most retirees' financial plans, and many are surprised to find out that in certain situations, Social Security benefits are subject to tax. But thanks to one little-known provision of the tax laws,moreretirees will pay taxes on Social Security in future years.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, explains how the rules governing Social Security taxation make it a certainty that more retirees will gradually pay higher taxes on their benefits. Dan notes that Social Security taxes are determined by adding up half your Social Security income plus most of your other income sources. If those amounts are above $25,000 for single filers or $32,000 for joint filers, you'll include part of your Social Security benefits as taxable income. But as Dan points out, those income limits aren't indexed for inflation, so more people will gradually land above those limits as income levels rise generally.
Be smart about your Social Security
You can't afford to let the IRS take away any more of your Social Security benefits than is absolutely necessary. In our brand-new free report, "Make Social Security Work Harder for You," our retirement experts give their insight on making the key decisions that will help ensure a more comfortable retirement for you and your family. Click here to get your copy today.