No one can say for sure how many pages or words are in Internal Revenue Code, and it’s a hotly debated topic online. What’s not debatable is the U.S. tax code is the most convoluted government revenue system in the world. The complexities can be mind numbing, and it only gets worse when you have to compute taxation on Social Security benefits.

The qualified retirement plan quandary propagates the theory that during your golden years, you’re in a lower tax bracket than your working years. There is a growing movement among economists tax brackets will remain equal or experience an increase due to government deficits. But even if your ordinary income tax bracket is lower when qualified plan income is distributed, it will be used to calculate whether your Social Security benefits are taxed as well.

Some municipal bond income could be categorized as a tax-preference item under the Internal Revenue Code. This could trigger the alternative minimum tax and adversely cause Social Security benefits to be taxed. Few muni bondholders are aware their muni bond income can fall into these indirect tax traps, the very reason they purchased muni bonds or muni funds: to avoid paying taxes.

The capital gains trap is another little-known indirect tax on Social Security benefits. Capital gain taxes are significantly less than ordinary income taxes and therefore preferred by taxpayers. However, while capital gains are taxed at a lower tax bracket, the full gain flows through the front page of the return and bulks up the AGI on the bottom of page one. This can force the taxpayer into a higher income tax bracket for the rest of the income, and AGI is used to determine how much Social Security income is taxable. It also affects a non-tax item: it’s used to determine Medicare premiums.

Suddenly, these great tax breaks don’t look so good to retired people on a fixed income trying to live off their hard-earned nest egg.

Syndicated financial columnist and talk show host Steve Savant interviews Tom Hegna, popular platform speaker; best selling author and retirement expert. Tom hosted the PBS Television Special “Don’t Worry Retire Happy.” The television special was designed after Tom’s latest book, “Don’t Worry Retire Happy.” Tom’s first book, “Playchecks and Paychecks” drew critical acclaim from financial advisers and insurance professionals. Right on the Money is a weekly one hour financial talk show for consumers ( and is underwritten by CreativeOne, Inc.