How to Minimize Social Security Taxes

Understanding how Social Security works is important. Lane V. Erickson/Shutterstock

You’ve been contributing to Social Security for decades, and now you find out you owe taxes. You’re not alone. Approximately 40 percent of people who receive Social Security pay taxes on it. Indeed, depending on your income, almost 85 percent of your Social Security benefits might be taxable.

When many people hear this, they have a rude awakening. You’re not told when you were younger that your benefits would be taxed. But how did this happen and how much is taxable? What do you do to minimize it.

What Percent of Social Security Is Taxable?

Before 1984, Social Security was tax-free. It’s now taxable to recipients who meet a certain income threshold. So, if you’re working part-time, you might fall into this trap. You'll also be stuck if you receive income from a 401(k).