Question: What is the difference between how social security benefits are taxed and distributions taken from retirement plan accounts (IRAs)?
Answer: The rules for taxing social security benefits are different than those for retirement plan benefits. Social security benefits may or may not be taxable. About forty percent of people who get social security pay income taxes on their benefits. Social security benefits are taxable but only 85% of benefits are taxable (15% always remain tax-free). Generally for a single individual with income between $25,000 and $34,000, up to ½ of social security benefits are taxable. If income is more than $34,000, up to 85% of social security benefits are subject to income tax. When distributions are made from a retirement plan benefit accounts (such as an IRA) they are taxable as ordinary income with no comparable exclusions. If you have any questions or would like more information please contact Steve Shane at:email@example.com | 301.575.0313.
ABOUT STEVE SHANE
Steve Shane provides strategic counseling to clients in need of estate administration, charitable giving and business continuity planning while minimizing estate, gift, and generation-skipping transfer tax exposure. He offers legal guidance to clients on asset protection and the proper disposition of assets in accordance with the client’s objectives, while employing tax planning techniques such as the use of irrevocable trusts, life insurance planning, lifetime gifts and charitable trust. He is also experienced with drafting documents for business planning, the incorporation and application for exemption for Private Foundations and the administration of decedents’ estates. You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn. WASHINGTON | BALTIMORE | FREDERICK | PHILADELPHIA | WILMINGTON | VIRGINIA | NEW YORK