Social Security Benefits, Wages, and Taxes…
I had a great question from a client today – this will be impacting more and more people as folks enter a “working retirement.”
Q: What age can I apply/receive social security and STILL continue to work and not have additional taxes taken out? 66, 67? I ‘think’ at age 66, I can earn around 37k and receive social security, but anything earned over 37k would have additional taxes taken. Is this correct? I emailed social security to get an accurate determination, but I received a response “any tax questions must be asked of IRS.”
Here’s some info in a nutshell:
There are two issues at hand: one is if your social security benefits will be reduced due to receiving other income, and the other is if any of your social security benefits are taxable.
If you receive social security benefits before full retirement age (these numbers are based on dates of birth between January 2, 1943 and January 1, 1955), then you can earn up to $14,160 of wage/salary income before your social security benefits are reduced. If you receive more than $14,160 in wage/salary income, then your benefits are reduced at the rate of $1 for every $2 you earn over the $14,160 base amount. The benefit reduction is on the “front end” which means your monthly checks are held until the reduction is “paid off.”read this post here!
If you receive benefits and have wage/salary income in the year that you reach full retirement age, the benefit reduction is $1 for every $3 you earn over $37,680 up until the month that you reach full retirement age.
So, let’s assume that you’ll reach full retirement age in August, 2012. You can earn up to $37,680 between January 1, 2012 and July 31, 2012 without reducing your social security benefits. If you earn more than $37,680 in that time frame, you will have reduced benefits of $1 for every $3 over the base amount that was earned between January 1 and July 31 inclusive.go to this website for more details:http://www.forbes.com/sites/kotlikoff/2015/10/29/social-security-qa-how-will-a-new-job-affect-my-benefits/
In regard to income tax, a portion of your social security benefits may become taxable. Under 2010 tax regs, if ½ of your social security benefits PLUS all of your other income (taxable and tax-exempt) is over the base amount ($25,000 for single, married filing separately, head of household, qualifying widow(er), and $34,000 for married filing jointly), a portion of your social security benefits may be subject to federal income tax.