Retirement, all benefits?

[jfmidm]

My Social Security statement says that in "full" retirement, I can keep all of my benefits, no matter how much I earned. However, Turbo Tax put that $13,685 of our $33,682 Social Security was taxable. Why is this?

[Critter]

You are mixing apples & oranges.   

Once you reach full retirement age you  can make as much as you like and keep every dollar of your SS benefits, they cannot be reduced by earnings any longer. 

Now, on the tax return ..... even though you get to keep every $ you may have to pay taxes on some of it ...

Social security only becomes taxable when added to sufficient other income. If you are otherwise required to file a tax return, you do need to enter it in Turbotax (TT). TT will determine the taxable portion.
Social security (including SSDI) becomes taxable when your income, including 1/2 your social security, reaches:
Married Filing Jointly(MFJ): $32,000
Single or head of household: $25,000
Married Filing Separately and lived with your spouse at any time during the tax year: $0

For the first  $9,000 (12,000 MFJ), only 50% of your SS is taxed. After that 85% is taxed. And gradually the  50% taxed  is replaced with the 85%. It's the government; they make it complicated. See IRS Publication 915. When TT prints out your return, it will provide you with the  IRS social security worksheet showing you how the taxable amount was calculated.  Here’s a copy showing you how the calculation is done:
http://apps.irs.gov/app/vita/content/globalmedia/social_security_benefits_worksheet_1040i.pdf

 If your use form 1040A, instead of 1040, see http://taxtopics.net/ssatax.pdf

[pk]

we are talking about two different  things.

Social Security income is taxable income except that a portion  ( or all of it ) may be excluded from taxable income based on your filing status  and "all other income" in your Gross Income.

Additionally till one is at "full retiremnt age",  wages/ earnings  above a certain threshhold (  update yearly ) result in reduction of Social Security benefits -- it is like $1 reduction for every  $ 2 / $3  of income above the "free" threshhold. This what Social Security  is talking about in their yearly notification to all SSA recipients -- not the taxabilty of the income.

[VolvoGirl]

What this all means is until you reach full retirement age they will actually reduce your checks if you make too much other income the previous year.  But up to 85% of SS can still be taxable every year.