Millions rely on Social Security for their financial security in retirement. But what many don't know is that Social Security benefits are subject to tax in certain circumstances. One group of lawmakers is trying to change that.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, talks about a recent bill to end income taxation of Social Security benefits. Dan begins by noting the way that Social Security gets taxed, with those earning over certain income limits having a portion of their benefits added to their taxable income. Yet Dan points out that double taxation is rampant in the U.S. tax system, using the example of the dividend payments that AT&T (NYSE:T), ExxonMobil (NYSE:XOM), and thousands of other companies make to their shareholders. Dan notes that one reason that Visa (NYSE:V), Goldman Sachs (NYSE:GS), and other low-yielding dividend stocks don't have higher payouts is that they choose instead to use stock buybacks to return capital to shareholders in a more tax-friendly way. Dan concludes with his assessment of the likelihood of this bill becoming law, noting that it's important to manage your taxes to minimize the impact of Social Security taxation on your overall tax bill.
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Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Visa. The Motley Fool owns shares of Visa. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.