taxes

8 tax breaks that cost Uncle Sam big money

Taxes » Tax Deductions 8 tax breaks that cost Uncle Sam big money

Social Security, Railroad Retirement benefits
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Social Security, Railroad Retirement benefits

Social Security, Railroad Retirement benefits

Retirees whose only income is Social Security or Railroad Retirement benefits usually don't owe federal taxes. However, the IRS gets a cut when a retiree has other income from, for example, a post-retirement job or investment earnings. Married retirees who file joint returns also must take into account any money earned by either spouse in determining whether any of the federal retirement payments are taxable.

In most cases when a retiree's additional earnings are large enough to attract IRS attention, up to 50 percent of federal benefits generally are taxable. However, in some situations a retiree could find up to 85 percent of Social Security or Railroad Retirement benefits taxed.

Still, plenty of benefit recipients escape taxation. They are expected to account for more than $209 billion in taxes that the U.S. Treasury won't collect between 2014 and 2018.

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