(Courtesy of Medicare Done) Did you know that your Social Security benefits might be taxable based on your overall income? Many retirees are surprised by this, but understanding the tax rules can help you better prepare for retirement.

Here’s how it works: The IRS calculates your “combined income” by adding your adjusted gross income (AGI), non-taxable interest, and half of your Social Security benefits. If your combined income surpasses certain thresholds, part of your benefits may be taxed:

For individual filers, benefits become taxable if your combined income exceeds $25,000.

For married couples filing jointly, the threshold is $32,000.

Depending on how much your income exceeds these limits, up to 85% of your benefits could be taxed. For example, if you’re an individual filer with a combined income of $35,000, you may have up to 50% of your Social Security benefits taxed at your current tax bracket. If your combined income increases further, up to 85% of your benefits could be taxable.

If you’re drawing from retirement accounts, receiving pensions or working part-time while collecting Social Security, you might be surprised by an unexpected tax bill. The good news is that there are strategies to minimize taxes, such as carefully managing when and how you withdraw from other income sources. When you pay tax on your Social Security benefit you increase your chances of running out of money five to seven years faster in retirement^*.

Social Security and taxes can feel like a balancing act, but we’re here to help. Schedule a free consultation with Yeshaya Jeremias, Registered Social Security Analyst^® (RSSA^®) at (248)919-8193 or email yeshaya@medicaredone.com to explore how these rules apply to your situation.

^*David McKnight