Tuesday, August 16, 2016

Keep IRA Distribution Income Taxes Low and Pay NO Tax on Social Security

Once you start taking Social Security (as a single filer), if you can keep your income below $25K you won't pay any taxes on your SS benefits:
http://www.marketwatch.com/story/how-do-ira-distributions-affect-social-security-2014-01-17

Also, IRA distributions are not subject to FICA taxes only income tax; Money taken out of traditional individual retirement accounts or IRAs is considered taxable income, but is not subject to FICA because those funds are contributed after FICA has been deducted by an employer or paid through self-employment tax: http://finance.zacks.com/ira-withdrawals-subject-fica-5179.html

From the Social Security site; Benefits Planner: Income Taxes And Your Social Security Benefits:
https://www.ssa.gov/planners/taxes.html

Also Note: For a self-employed person contributing to his or her own SEP IRA, contributions are deducted as an adjustment to income on Form 1040 line 28. SEP contributions reduce a person's adjusted gross income, reduce taxable income, and thereby reduce the federal income tax. SEP IRAs do not impact the calculation of the self-employment tax, since the self-employment tax is calculated before SEP contributions are calculated: https://www.thebalance.com/tax-planning-with-sep-iras-3193211

Other important Tax Lowering factors; How do I figure my EIC or Earned Income Credit? 
Who qualifies?
Many people think the credit is available only to parents. It's not. But the amount the Internal Revenue Service will give back is greater for eligible low-wage taxpayers with children.

For current year returns, the maximum credit can be as much as $6,242 for workers supporting three or more children. A worker with one child can get up to $3,359 with the credit. And $503 is available to a childless eligible employee. The amount is adjusted slightly for inflation each year.

To qualify for the credit, a taxpayer must have earned income, but stay within certain thresholds.

A single filer's adjusted gross income must be less than $14,820 if he or she has no children; $39,131 with one child; $44,454 with two children; and $47,747 with three or more children. For Married couples filing jointly your adjusted gross income must be less than $20,330 if he or she has no children; $44,651 with one child; $49,974 with two children; and $53,267 with three or more children.

If your AGI (Adjusted Gross Income) is equal to or more than the applicable limit listed above, you cannot claim the EIC:
https://www.taxslayer.com/support/208/how-do-i-figure-my-eic-or-earned-income-credit?language=1

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