Is Social Security Taxable?

Today TaxMama hears from Stephen in the TaxQuips Forum who is surprised. “Hang on here, Mama. You’ve raised a question in your answer. I thought that Social Security benefits were not taxable if you waited until full retirement age.
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Only early retirement takers had a maximum income that you could earn.
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Help. Straighten me out here, please.”

https://taxmama.wpengine.com/forum/taxquips/is-social-security-taxable/ 

Hey Stephen,

Surprise, surprise, surprise….as Gomer Pyle used to say.

Yup. Social Security benefits are ‘taxed’ two ways.

What you are talking about is having to pay BACK the SS benefits if you are under age 65 or 66, or whatever the current minimum age happens to be.

When you hold down a job AND collect SS benefits before that minimum age, you have to repay the government when you earn more than their annual maximums.
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For every $2 you earn over the limit, you have to pay back $1 to the Social Security Administration. For 2010, that limit is $14,160.
https://www.socialsecurity.gov/pubs/10069.html#howmuch

So it’s wise to do some planning before taking early SS benefits.

Of course, if you’re rich and all your income comes from interest, dividends, rents and royalties, among other sources of ‘unearned’ income, you can earn millions of dollars without having to pay a cent back to Social Security. Somehow, it seems to me this part of the repayment of benefits law should apply to all income, equally.

The other way SS benefits are taxed is through your income tax. IRS explains it here – https://www.irs.gov/newsroom/article/0,,id=179091,00.html

For 2009, up to 85% of your benefits are subject to income tax if – you are married filing jointly and earn $32,000 or more; single (and other statuses) earning $25,000 or more; or, worst of all, married filing separately, and living together – earning over ZERO!

And remember, you can find answers to all kinds of questions about social security and other tax issues, free.
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Where? Where else? At www.TaxMama.co m.

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