Combined Income Could Help Save Tax on Social Security Benefits
Data: How to Cut Taxes on Clients' Social Security Benefits
You can deploy a construct called either "combined income" or "provisional income" to help clients save.
To get this amount, add adjusted gross income (AGI) to any nontaxable interest income and one-half of Social Security benefits. For example, with AGI of $30,000 plus $10,000 of tax-exempt interest and $18,000 of Social Security benefits, combined income is $49,000 ($30,000 + $10,000 + $9,000).
Depending on filing status, a series of combined income thresholds ranges from $25,000 to $44,000; the portion of Social Security benefits subject to income tax grows from 0% to 85%, as combined income clears those thresholds.
When clients have combined income in the threshold range or slightly higher, tactics to reduce AGI may have the extra advantage of lowering the tax on Social Security benefits.