A Social Security Tax Trap To Avoid

A long time ago Social Security was tax free, but today there are a lot of taxpayers who can expect to pay taxes on their Social Security income. There is a hidden trap that can ensnare people who convert their Traditional IRAs into Roth IRAs. If they exceed the funding limits that extra income can push that person beyond the income threshold level and subject them to taxes on thousands of dollars in Social Security income. This article provides a table describing the two separate income thresholds that filers will use to determine whether they have to pay taxes on their Social Security benefits. It describes what filers must do to calculate their “modified adjusted gross income (MAGI).” There are many available remedies that people can use to lower their Social Security taxes.

See Mark P. Cussen, Avoid the Social Security Tax Trap, Investopedia, January 12, 2016.