"Some clients will always pay tax on 85% of their Social Security benefits," says Martin James, a CPA/PFS who is president and managing member of Martin James Investment & Tax Management in Mooresville, Ind. That's the maximum that can be taxed: for high-income seniors, $20,000 of benefits would generate $17,000 of taxable income.

Conversely, some clients will owe no tax on their benefits because of relatively low income. In between, savvy planning may help seniors reduce the tax they owe on Social Security benefits.

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