5 Ways to Pay Fewer Taxes in 2018David Macino
Death and taxes are the only things that are certain, and your obligation to Uncle Sam continues even after you retire. When what you’ve saved needs to last the rest of your life, you don’t want to give away any more than you have to. Discover sound tax strategies to pay fewer taxes in 2018.
Understand Social Security Taxation
Social Security laws relating to benefit taxation haven’t been adjusted for inflation since they were implemented in 1983. Individuals pay taxes on benefits when their income is $25,000 or more a year. Couples pay when their joint income is $32,000 or more.
If you can afford to stay below those income thresholds, you can avoid paying taxes on your social security income altogether. If you don’t have any other funds saved for retirement, you may have to retire as late as possible to maximize your social security income. However, if you have other money set aside, claim benefits early to receive a lower annual amount.
Buy State Municipal Bonds
If you have a large amount to invest, avoid paying federal income tax when you purchase bonds issued by your city, county or state. The interest you earn is not subject to federal tax, and in many situations, it is also state tax exempt. The bonds are used to fund schools, roadways, and other public structures.
Invest in a Roth IRA
This type of retirement savings account uses after-tax dollars. Before you fund your account, you pay taxes on your investment, so it’s not taxed again when you remove it. As long as you wait until you’re 59 ½, you can withdraw funds without a penalty, and they don’t count toward your annual income. While traditional IRAs require you to start taking distributions when you pass 70, Roth IRAs have no required distribution, so you can leave your money to grow tax-free for as long as you like.
Use the Capital Gains Exemption if You Sell Your Home
When people retire, they often sell their family home and purchase something smaller. If you lived in your home for at least two of the past five years, profit on the sale isn’t subject to taxes up to $250,000 for individuals and $500,000 for those filing jointly.
Talk to a Planning Expert to Help You Pay Fewer Taxes
Tax rules change all the time, and there’s a lot of confusion about impending modifications. Talk to a professional retirement advisor to ensure you’re making the most of what you worked so hard to save. For more tax tips and investment advice, contact Macino Financial Services today.
Investment advisory services are offered through Virtue Capital Management, an SEC Registered Investment Advisor. Macino Financial and VCM are independent of each other. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. Information on this website does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information on products and services. A professional adviser should be consulted before implementing any of the options presented.
David Macino and/or Macino Financial Services are not affiliated with or endorsed by Medicare, Medicaid or any other government agency.
Information provided is not intended as tax or legal advice, and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.