This tax season, returns might look very different for a lot of Americans. This week, Hans and Robby talk about what differences people 62 and older might see.
Social Security is the biggest difference for people in this age bracket. If your only income is Social Security, you will pay no income taxes on this money. If your other taxable income is small, you will pay some tax on that income, but still none on your Social Security benefit. Only when you reach higher levels of other income does your Social Security benefit become taxable. It is important to note that you will never be taxed on more than 85% of your Social Security benefit. You can lower the taxes on your Social Security if you plan ahead, especially by using money from a Roth IRA versus a traditional IRA.
If you do have money in a traditional IRA, which counts as taxable income when withdrawn, there is a way to take this money and avoid taxes. Using distributions from this account as a QCD, or Qualified Charitable Distribution, allows you to make donations directly from this account and qualify this money as nontaxable income. As Robby says, if you are already donating $100 or more a month to your church, you are over 70 ½, and you have a traditional IRA, you could be leaving a lot of money on the table.
Taxes are important, and it is important that you stay educated on all the aspects of your money in order to make sure you are paying only what is necessary, not any more.
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You can contact Hans and Cardinal by emailing email@example.com or calling 919-535-8261. Learn more at CardinalGuide.com.