TRUTH 6Taxable Social Security benefits

You’ve stopped working, but that doesn’t dissuade the IRS.

The agency finally gets to collect on your tax-deferred retirement accounts, with distributions from traditional IRAs and 401(k) taxed at your ordinary income tax rate. That same rate applies to the bit of extra cash you pick up from a part-time job.

The earnings from your other investments get a bit of a break, with tax on at least some of that money assessed at the lower capital gains rate.

And then there’s Social Security. A sizeable chunk of your paychecks went to this federal program. Now you’re looking forward to finally collecting your benefits.

The IRS might be collecting on those payments, too.

The effect of other income—When the Social ...

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