--- title: Four Tax Challenges You May Encounter When Retiring description: Retirement brings major tax changes. Understand four key challenges, from required minimum distributions to Social Security taxation, so you can plan ahead. image: https://www.brinkersimpson.com/hubfs/BSCO_BlogIcon_Four%20Tax%20Challenges%20You%20May%20Encounter%20When%20Retiring.png --- [610-544-5900](tel:+16105445900) • [contact@brinkersimpson.com](mailto:contact@brinkersimpson.com) [Client Portal ](https://www.securefirmportal.com/Account/Login/4874) [Pay Now ](https://www.brinkersimpson.com/pay-online) [Brinker Simpson ](https://www.brinkersimpson.com/) - [ Services ](https://www.brinkersimpson.com/services) - [ Strategic Advisory ](https://www.brinkersimpson.com/services/strategic-advisory) - [ Accounting Support ](https://www.brinkersimpson.com/services/accounting-support) - [ Tax Services ](https://www.brinkersimpson.com/services/tax) - [ Audit and Assurance ](https://www.brinkersimpson.com/services/audit-assurance) - [ Transaction Advisory ](https://www.brinkersimpson.com/services/transaction-advisory) - [ Valuation Services ](https://www.brinkersimpson.com/services/valuation) - [ Risk Advisory ](https://www.brinkersimpson.com/services/risk-advisory) - [ Peer Review Services ](https://www.brinkersimpson.com/services/peer-review) - [ About ](https://www.brinkersimpson.com/about) - [ People ](https://www.brinkersimpson.com/about/team) - [ Community ](https://www.brinkersimpson.com/about/community) - [ Industries ](https://www.brinkersimpson.com/industries) - Resources - [ Articles ](https://www.brinkersimpson.com/resources/articles) - [ Newsletter ](https://www.brinkersimpson.com/resources/newsletter) - [ Careers ](https://www.brinkersimpson.com/careers) [ Let's Connect ](https://www.brinkersimpson.com/contact) - [ Services ](https://www.brinkersimpson.com/services) - [ Strategic Advisory ](https://www.brinkersimpson.com/services/strategic-advisory) - [ Accounting Support ](https://www.brinkersimpson.com/services/accounting-support) - [ Tax Services ](https://www.brinkersimpson.com/services/tax) - [ Audit and Assurance ](https://www.brinkersimpson.com/services/audit-assurance) - [ Transaction Advisory ](https://www.brinkersimpson.com/services/transaction-advisory) - [ Valuation Services ](https://www.brinkersimpson.com/services/valuation) - [ Risk Advisory ](https://www.brinkersimpson.com/services/risk-advisory) - [ Peer Review Services ](https://www.brinkersimpson.com/services/peer-review) - [ About ](https://www.brinkersimpson.com/about) - [ People ](https://www.brinkersimpson.com/about/team) - [ Community ](https://www.brinkersimpson.com/about/community) - [ Industries ](https://www.brinkersimpson.com/industries) - Resources - [ Articles ](https://www.brinkersimpson.com/resources/articles) - [ Newsletter ](https://www.brinkersimpson.com/resources/newsletter) - [ Careers ](https://www.brinkersimpson.com/careers) [ Let's Connect ](https://www.brinkersimpson.com/contact) [ 610-544-5900 ](tel:+16105445900) [ contact@brinkersimpson.com ](mailto:contact@brinkersimpson.com) [Client Portal ](https://www.securefirmportal.com/Account/Login/4874) [Pay Now ](https://www.brinkersimpson.com/pay-online) June 29, 2023 # Four Tax Challenges You May Encounter When Retiring by: [Brinker Simpson & Company](https://www.brinkersimpson.com/blog/author/brinker-simpson-company) 3 Minute Read If you’re getting ready to retire, you’ll soon experience changes in your lifestyle and income sources that may have numerous tax implications. Here’s a brief rundown of four tax and financial issues you may contend with when you retire: ## Taking required minimum distributions These are the minimum amounts you must withdraw from your retirement accounts. You generally must start taking withdrawals from your IRA, SEP, SIMPLE and other retirement plan accounts when you reach age 73 if you were age 72 after December 31, 2022. If you reach age 72 in 2023, the required beginning date for your first RMD is April 1, 2025, for 2024. Roth IRAs don’t require withdrawals until after the death of the owner. You can withdraw more than the minimum required amount. Your withdrawals will be included in your taxable income except for any part that was taxed before, or that can be received tax-free (such as qualified distributions from Roth accounts). ## Selling your principal residence Many retirees want to downsize to smaller homes. If you’re one of them and you have a gain from the sale of your principal residence, you may be able to exclude up to $250,000 of that gain from your income. If you file a joint return, you may be able to exclude up to $500,000. To claim the exclusion, you must meet specific requirements. During a five-year period ending on the date of the sale, you must have owned the home and lived in it as your main home for at least two years. If you’re thinking of selling your home, make sure you’ve identified all items that should be included in its basis, which can save you tax dollars. ## Getting involved in new work activities After retirement, many people continue to work as consultants or start new businesses. Here are some tax-related questions to ask if you’re launching a new venture: - Should it be a sole proprietorship, S corporation, C corporation, partnership or limited liability company? - Are you familiar with how to elect to amortize start-up expenditures and make payroll tax deposits? - Can you claim home office deductions? - How should you finance the business? Taking Social Security benefits If you continue to work, it may impact your Social Security benefits. If you retire before reaching full Social Security retirement age (65 years of age for people born before 1938, rising to 67 years of age for people born after 1959) and the sum of your wages plus self-employment income is over the Social Security annual exempt amount ($21,240 for 2023), you must give back $1 of Social Security benefits for each $2 of excess earnings. If you reach full retirement age this year, your benefits will be reduced by $1 for every $3 you earn over a different annual limit ($56,520 in 2023) until the month you reach full retirement age. Then, your earnings will no longer affect the amount of your monthly benefits, no matter how much you earn. You may also have to pay federal (and possibly state) taxes on your Social Security benefits. Depending on your income from other sources, you may have to report up to 85% of your benefits as income on your tax return and pay the resulting federal income tax. ## Tax planning is still important There are many decisions to make after you retire. Speak to your financial advisor to help maximize the tax breaks you’re entitled to. 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