The burden that comes with the taxation of Social Security benefits.
Taxation Of Social Security Benefits
Almost half of American households that are under Social Security are subjected to taxation of Social Security benefits. Despite the misconception that they are not subject to taxation, the taxation of Social Security benefits is real.
In terms of the taxation of Social Security benefits, you need to calculate your combined income, which includes adjusted gross income (AGI), non-taxable interest, and 50% of your Social Security benefits. The taxation of Social Security benefits will be applied to 50% of your benefits if your combined income is between $25,000 to $34,000 (for individuals) or $32,000 to $44,000 (for couples filing jointly).
taxation of Social Security benefits will also be applied to 85% of your benefits if your combined income exceeds $34,000 (for individuals) or $44,000 (for couples filing jointly). To prevent being subjected to taxation of Social Security benefits, you can make tax-deductible contributions to an IRA and rely on a combination of Social Security benefits and income from Roth accounts.
According to a published article by moneywise, one strategy to avoid taxation of Social Security benefits is to delay claiming them and fund your early retirement through IRA and 401(k) withdrawals.
Consulting with a financial adviser can also help you determine which strategies can reduce your tax burden and maximize your Social Security benefits all while avoiding taxation of Social Security benefits.
Deadline For IRA Contribution
In a published article by Forbes, the deadline to contribute to an IRA for tax year 2023 is April 18, 2024. If you are 50 or older, the contribution amount limit is around $6,500, or $7,500. For the tax year 2024, the limits increase to $7,000 and $8,000 respectively.
The deadline is usually the federal tax filing deadline, but it may be extended due to holidays or if your area is declared a federal disaster. Contributions to a traditional IRA are deductible from your taxable income and the investments grow tax-free.