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How to Minimize Taxes in Retirement

When it comes to money every penny counts, especially when you’re retired! Fortunately, there are plenty of ways to save money in retirement by minimizing your tax bill. The financial advisors at Maggi Tax Advisory and Financial Group offer tips on how to do just that…

Diversity your accounts. When you withdraw funds from accounts such as traditional IRAs and 401(k)s, it is considered taxable income. With a Roth IRA, you do not have to pay taxes on withdrawn funds. To help with tax planning, we advise our clients to invest in a mix of traditional and Roth accounts and to withdraw money from each account in a way that will minimize your tax bill the most.

Strategize your Social Security earnings and outside income. Rule of thumb…if the sum of your outside income and one-half of your Social Security add up to more than $25,000 for singles and $32,000 for joint filers, then a portion of your benefits will be subject to tax. When possible, keep your outside income at a certain level so you don’t have to pay taxes on Social Security earnings.

Take advantage of low rates on dividends and long-term capital gains. Because qualified dividends and long-term capital gains get taxed at lower rates, smart investors take full advantage of these breaks, especially in retirement. If you are in the 10% or 15% tax bracket, your dividends and capital gains are tax-free! The point is, when you sell investments, be mindful of whether the stock dividends are qualified or not. The net results could lead to some hefty tax savings.

Educate yourself on senior tax breaks. Did you know the standard deduction for individuals 65 years and older increases by $1,650 for singles and $1,300 or joint filers?! There are tons of tax perks for seniors! Want to take full advantage? Contact Maggi Tax Advisory and Financial Group to learn about the other tax provisions available to seniors.

Relocate to a tax-friendly state. If you are looking to relocate in retirement, choose a state that (a) doesn’t impose taxes at all or (b) a state that has low-income tax levies combined with reasonable rates for sales tax and property tax.

Donate money is a tax-favorable way. Whether you wish to make a charitable donation to your favorite cause or gift money to children and grandchildren, you will benefit from positive tax ramifications by using tax-free contributions from an IRA account. Just be mindful of the amount! In the state of Florida, $12,500 (???) is the cap on monetary gifts that will not be subject to income tax.

Maggi Tax Advisory and Financial Group can help tax planning in retirement!

To learn more about our established financial services firm or to schedule an appointment, please contact our Hillsborough office at (813) 850-0131 or our Pinellas/Pasco location at (727) 351-6168.


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