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Making Finances Simple. Changing Lives.

9/4/2014

Social Security Taxation & Benefits

Read below for a quick reference guide on Social Security Taxation and the effect on your benefits if you keep working.....

To calculate IF social security income is taxable:
  • First add ½ of your social security benefits to all other income
  • Then compare the above total to the base amount for your filing status (see below)
  • If the above total is more than your base amount, some of your benefits may be taxable

2020 Base Amounts:
  • $32,000 for married couples filing jointly
  • $25,000 for single, head of household, or married individuals filing separately who did NOT live together
  • $0 for married persons filing separately who DID live together during the year

To see HOW MUCH social security income is taxable:
Generally up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following applies to you:
  • The total of ½ your social security benefits and all your other income exceeds $34,000 ($44,000 if your status is married filing jointly)
  • You are married filing separately and lived with your spouse at any time during the year

Determining the EFFECT OF EARNED INCOME on benefits:
In years PRIOR to full retirement age:
  • $1 in benefits will be lost for every $2 of earning in excess of $15,480 (wages only; investment earnings don’t apply)
  • You may lose some benefits, but at least you are able to accumulate more credits for when you hit retirement age

In the YEAR OF full retirement age:
  • $1 in benefits will be lost for every $3 of earning in excess of $41,400 (applies only to the months of your earnings prior to full retirement age)

In the TIME AFTER full retirement age:
  • There is no limit on earnings beginning the month that an individual attains full retirement age

Click here for the Full Retirement Age Calculator on the Social Security Administration website.

We always recommend that you speak with a qualified financial advisor before making any decisions related to your social security.


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