As inflation continues to rise at a rapid rate, Social Security beneficiaries are seeing bigger tax bills.
A collective $10.5 billion dollars will be paid in taxes on retirement benefits for 2022.
A survey showed that 51% of beneficiaries did not expect to pay taxes this year.
According to the Senior Citizens League, the increase is due to a larger number of retirees with higher incomes.
Social Security: Maximum benefit of $4,194 for 2022
The major COLA increase this year will have an impact on next year’s taxes.
Every year inflation and COLA bumps Social Security up, which then pushes beneficiaries into a higher tax bracket.
While inflation and benefits rise, the limit at which they’re taxed stays low.
For single filers, once they get past $25,000 they’re taxed. Joint filers are taxed at $32,000.
IRS: Don’t lose $1,000s to surprise taxes when retiring
How to avoid higher taxes on Social Security benefits
There are some things you can do to help control what you may have to pay, if anything, for taxes on Social Security.
Look into what state you choose to live in.
There are only 13 states that tax your benefits.
Protect your sensitive information and tax refund
The rest are only federal income tax.
You may also keep money in your Roth IRA.
You can’t deduct your contributions but the earnings can grow without being taxed.
You could also take IRA withdrawals before you retire and collect Social Security benefits.
If you live off of your savings this way you can prolong your benefits and make them larger in the long run.
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