In addition to earning a salary, taxpayers may also be receiving Social Security benefits. Depending on the individual’s age, benefits may be reduced and included in the recipient’s gross income.
Taxpayers at and above full retirement age can continue to earn unlimited amounts without any reduction in Social Security benefits. Full-retirement age was 65 for many years. However, beginning with 1938 birthdates or later, that age gradually increases.
Receiving Social Security Benefits
If you were born January 2, 1943, through January 1, 1955, then your full retirement age for retirement insurance benefits is 66. If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn. If you are younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits. If you are younger than full retirement age during all of 2015, $1 will be deducted from your benefits for each $2 you earn above $15,720.
Taxes on Receiving Social Security Benefits
If you reach full retirement age during 2015, $1 will be deducted from your benefits for each $3 you earn above $$41,880 until the month you reach full retirement age.
A portion of Social Security benefits is included in the gross income of a recipient whose total income exceeds applicable base and adjusted base amounts. The base amounts and adjusted base amounts vary with the filing status of the recipient.
Income Tax Withholding on Social Security
Since income tax is not withheld on Social Security, you may need to pay estimated tax. Our office can help you determine if you should pay estimated tax. Additionally, even though Social Security benefit payments are not automatically subject to withholding, a taxpayer may request to have federal income tax withheld from them.
If you would like more information on how Social Security payments may affect your tax positions, either now or in the future, please do not hesitate to call.