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  • Mark Young, CPA

5 Ways to Reduce Your Taxes in Retirement

It's helpful to remember that it’s not how much you make, but how much you keep.

You save money all of your life and if you’re not careful, you can lose much of what you save to taxes in retirement. The suggestions below will help you reduce your taxes in retirement.

1. Avoid paying taxes on your social security income by keeping social security modified taxable income below the thresholds of $25,000 (single) and $34,000 (married). Following is a link to a calculator you might find helpful.

Social Security Calculator

You can reduce your taxable income by doing the following:

2. Investing in Municipal Bonds within your State.

3. Contribute to a Roth IRA during your working years. Roth distributions taken during retirement are not taxable, so they do not count toward the Social Security threshold.

4. Hold your investments for the long term (for select tax brackets) to create lower rate capital gains.

5. Use the home-sale capital gains tax exemption. Currently you can avoid taxes on up to $250,000 of gains on the sale of your residence if you lived in it and owned it for two of the last five years.

These rules are meant to be general in nature. Make sure to contact your tax professional to be sure that these rules apply to you.

For more Social Security planning resources:

Social Security Retirement Planning

The above is considered to be general tax information and is not intended to be used as tax advice. If you believe that any of the above applies to you, please consult with a tax professional. See our Legal Statement.

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