It’s tax planning time with Tax Rescue CPA! This huge tax-saving tip is specifically designed for those receiving Social Security benefits AND having one or more Traditional IRAs.
Here’s the Scenario
Many folks rely on Social Security benefits to cover day-to-day expenses while leaving their Traditional IRA untouched. This can feel smart—you’re being frugal, saving that IRA for a future need, and planning to pass what’s left on to the kiddos.
The Missed Opportunity
Whether you’ll need a large $$$ amount $$$ for an unexpected expense or your IRA is passed down to your kids, there will likely be a hefty tax bill when that time comes. But here’s the good news: I’ll show you how to take advantage of the tax code to reduce or even eliminate that tax bill.
Example Taxpayer Profile
- Single
- Age 64
- Annual Income:
- Social Security Benefits: $26,000
- Interest: $1,100
- Dividends: $2,000
- Traditional IRA Balance: $180,000
(Note: Interest & dividends are from a non-IRA account)
Scenario 1: Without Tax Planning:
Social Security taxable $0
Interest & Dividends taxable $3,100
Total Taxable Income: $3,100
Less Standard Deduction ($13,850)
Federal Taxable Income $0
Federal Tax $0
Scenario 2: With Tax Planning
Let’s say the taxpayer rolls over $10,133 from their Traditional IRA to a Roth IRA:
Social Security taxable $617
Traditional IRA Distribution taxable $10,133
Interest & Dividends taxable $3,100
Total Taxable Income: $13,850
Less Standard Deduction ($13,850)
Federal Taxable Income $0
Federal Tax $0
The Power of Planning
Using this strategy, our example taxpayer moves $10,133 from a pre-tax Traditional IRA to an after-tax Roth IRA without paying a dime in federal taxes. Over time, this approach can save thousands in taxes, as every dollar rolled into the Roth IRA grows tax-free and can be used in the future or passed on without triggering any tax consequences.
All it takes to save thousands in tax dollars is a little planning. Ask your tax preparer if they can help you implement this strategy—or better yet, ask Tax Rescue CPA!
Get a Free Tax Review
Here is your personal invitation to claim a Free Tax Review. Don’t wait—let’s make sure you’re taking full advantage of tax-saving opportunities!
“Who’s Doing Your Taxes?” – Tax Rescue CPA
