Some of you are old enough to remember when Social Security benefits were free of income taxes, as originally promised. Now they can be taxed at a rate of up to 85%, if you are considered a high income retiree. (My report, Retirement Tax Guide has details. Call customer service at 800-552-1152 for information.)
Year-end tax planning can reduce taxes on your Social Security benefits if you are near the income level where the higher rate kicks in. A few changes between now and Dec. 31 can keep you from getting hit with a much higher rate on your benefits.
The best strategy for reducing taxes on benefits is to defer income. You might do this by avoiding the sale of assets with capital gains until next year, postponing distributions from IRAs that are not required, and rolling over a pension lump sum instead of using an averaging method or taking periodic payments. You might also consider selling assets that will incur capital losses if these will offset gains enough to reduce taxes on Social Security benefits.