social security taxed after 66yrs old
client is electing to take ss at age 64 while still working P/T.
She is stating that after age 66, she can go back to full time and make as much as she wants since ss wont be taxed on the amount of money you make after age 66…is this correct?
Thank you,
Douglas
Permalink Submitted by Alan Spross on Mon, 2012-12-10 20:31
You are describing the SS earnings test, not the taxation of the benefits.
The earnings test applies prior to the date that the client reaches her FRA, which is 66. Since she is not yet 66 and claimed benefits, if she earns more than 14,640 in 2012 she must return some of her SS benefit. This restriction ends at 66 after which she can earn as much as she wants without losing current SS benefits. But note that the loss of benefits is NOT permanent. What happens is that the loss is converted into whole months of lost benefits and later on her penalty for claiming benefits early is reduced. In other words, over the rest of her lifetime she recovers the lost SS benefits, ie gets them later rather than in the year benefits are reduced. The benefit reduction is $1 for each $2 of earnings above the limit allowed (1 for each $3 of earnings in the year she reaches 66). This is why many part time worker choose to work until their earnings reach the annual limit of 14,640 and then stop. This limit will increase to 15,120 in 2013.
Taxation is based on the usual rules with respect to SS benefits collected net of the reduction.