Reducing Current Income Taxes on Social Security

Reducing or deferring current income taxes on Social Security income is now possible by owning a tax-deferred annuity. How? As you can see on our questionnaire, interest earned on currently taxable alternatives (line 1) and interest earned on municipal bonds (line 2) could trigger federal income taxes on your Social Security income. How do you reduce taxable interest? One increasingly popular way to reduce or defer federal income taxes on Social Security income is to reduce taxable interest earned on currently taxable alternatives. Simply put, if you are earning interest on currently taxable investments such as CD’s, Money Market Accounts, Treasury Bills or Corporate Bonds and you don’t currently need the interest yet to supplement your retirement, you should consider repositioning some of these dollars to a tax-deferred annuity, “Why pay taxes on interest you don’t quite need?”

As you can see on our questionnaire, reducing the amounts that you report as taxable interest on line 1 can automatically reduce line 4 and you may be able to reduce or defer tax on Social Security income (depending on the extent of other income you report on line 1). Since interest accumulating in a tax-deferred annuity is tax-deferred until interest is withdrawn, people who reposition some of their money from currently taxable alternatives to policies that have tax deferred growth may not have to report that interest on this Social Security Questionnaire.