Is social security taxable? This is just one of many questions that come up about social security retirement benefits. Government benefits can be difficult to navigate, so Low Income Relief has compiled answers to some of the most common questions about social security retirement!
Before we answer the question, “is social security taxable”, let’s take a moment to understand what social security retirement is and how it works.
Social security was created about 90 years ago to promote economic security among the elderly in the United States. Prior to that, there was no real social safety net for Americans who were unable to work in old age.
Americans pay social security taxes throughout their working lives and earn “credits” toward their social security retirement benefit. In order to receive social security retirement benefits, you must earn at least 40 credits.
The full retirement age for social security is 67, but it is possible to begin drawing your social security retirement benefits as early as age 62. However, there is some benefit to waiting to draw your social security retirement payments. The earlier you begin drawing your benefits, the lower your monthly payment will be.
If you wait until age 70 to begin receiving your social security retirement benefits, the amount you receive per month will be even more.
The age at which you can receive your social security retirement benefit may also depend on whether you have worked enough to earn at least 40 credits. If you have not worked enough throughout your lifetime, you may have to continue working until you have earned at least 40 credits, even if you have reached what is considered to be full retirement age.
As long as you have worked a minimum of 10 years in your life, earning at least roughly $6,040 per year, then you will be eligible to receive some social security.
The Social Security Administration offers a free online calculator to help you estimate how much social security retirement you will receive each month when you retire. When you enter your earnings for the current year, this calculator automatically estimates how much you may have earned in previous years.
In order to make a more precise calculation of potential social security retirement earnings, you can click on “see the earnings we used”, on the page that displays your initial calculation. There, you can enter your actual earnings for previous years before re-calculating.
More information about the online calculator can be found on the Social Security Administration’s FAQ page.
Generally, you can expect that your social security retirement earnings will be more, the higher your lifetime earnings have been.
It is also important to know that your monthly payment might be affected if you continue to work, and if you have to pay taxes on your benefit. These issues are covered in the next two sections.
It is possible to work and receive social security retirement benefits at the same time. However, if you are younger than full retirement age (age 67) and you continue to work, your social security benefit will be reduced.
That doesn’t mean that you lose that money in the long run. After all, you earned your social security benefit by working and paying taxes for many years. You will receive that benefit eventually, in the form of an increased monthly retirement benefit, when you reach full retirement age.
More information on how work affects social security benefits is available in this handbook from the Social Security Administration.
As with many questions about government benefits, the answer to the question, “is social security taxable” is it depends.
About 40% of Americans do pay some taxes on their social security retirement benefits. If you file taxes as an individual or as a married couple filing jointly, and your total income is between $25,000 and $34,000 per year, you will pay taxes on 50% of your social security benefits. If your income is more than $34,000, you will pay taxes on 85% of your social security benefits.
If you are married and file separately, you will likely pay taxes on your social security retirement benefits.
More information on social security benefits is available in this handbook from the Social Security Administration.
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Catherine Hall
Catherine Hall, LMSW is a therapist at a small group practice in New York City. She earned her master of social work degree at New York University.