I worked full-time job until the end of March when I was terminated. I have been collecting unemployment since the middle of April. At that time in April I decided to retire. I have been receiving Social Security since the end of May. Is there an amount of income that I need to be limited to when collecting Social Security? And does that amount include unemployment, since I don’t know if unemployment is considered as wages?
Up to 85% of your Social Security benefits can be taxable on your federal tax return. There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits. When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable.
What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2019 it was $17,640— for 2020 it was $18,240; for 2021 it was $18,960. For 2022 it was $19,560 — for 2023 $21,240)
After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare. If you work as an independent contractor then you will pay self-employment tax for Social Security and Medicare.
To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2022 Form 1040
You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.
Some additional information: There are 11 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont These states offer varying degrees of income exemptions, but two mirror the federal tax schedule: MN and VT.
If you are less than your full retirement age, your benefit can be reduced if you work. Specifically, if you work too much in 2023, your benefit for 2024 will be reduced. If you work too much in 2024, your benefit will be reduced for 2025, and so on. There is a special calculation used if you declare retirement during the middle of the year, so that your work income from before you declared retirement is not counted toward reducing your benefit. You can read more here.
After you reach full retirement age, your benefit is not reduced no matter how much you work.
Separately, your benefit may be taxable, and that has nothing to do with your age or working status, only the total amount of income reported on your tax return.
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