The Press-Dispatch
Issue link: https://www.ifoldsflip.com/i/1178794
The Press-Dispatch Local Wednesday, October 23, 2019 A- 9 By Russell Gloor Dear Rusty: I retired from work this year (age 62) and I will receive my first social se- curity bene- fits in Septem- ber. Is there a special rule for the first year you retire that allows you to not pay taxes on your social security since you have earned no other income since you retired? Before I retired, I earned about $50,000, which I know is more than the usual al- lowed income—Signed: Re- tired Senior. Dear Retired Senior: I'm afraid there is no such "first year" rule which ex- empts you from paying in- come tax on your Social Se- curity benefits. When you file your Federal income tax- es with the IRS you will need to claim your Social Securi- ty (SS) benefits as part of your income, and whether it is taxable will depend upon whether your "modified ad- justed gross income" (MA- GI) for the year exceeds $25,000 (if you file single) or $ 32,000 (if you file married- filing jointly). "MAGI" in- cludes your taxable income from all sources (your "ad- justed gross income" from your Federal income tax re- turn), plus any tax-exempt interest you may have re- ceived, plus half of your an- nual Social Security bene- fits. If your MAGI exceeds the above levels, then up to 50 percent of your Social Se- curity benefits will become a part of your taxable income; or if you exceed $ 34,000 (fil- ing single) or $44,000 (fil- ing married-jointly) then up to 85 percent of your annu- al SS benefits will become taxable. If you don't exceed those levels your SS benefits aren't taxable as income. However, I suspect you may be confusing income tax on your Social Security benefits with another rule - Social Security's "earnings test" which, if you have not yet reached your full retire- ment age, sets a limit on what you can earn without your benefit pay- ments being af- fected. If you are collecting ben- efits before you have reached your full retire- ment age and you exceed the annual earnings limit ($17,640 for 2019) Social Security will withhold some of your ben- efits – $1 for every $2 you are over the limit. If that is what you're referring to then, yes, there is a special rule for the first year you are collecting Social Security. That special first year rule says that if you claim benefits mid-year and you have not yet reached your full retirement age, you'll be subject to a month- ly earnings test for the re- mainder of that year, rath- er than the annual test. So, if your benefits start in Sep- tember, provided you don't earn more than $1470 in Sep- tember or any month there- after in 2019 you won't lose any benefits. But if you do exceed that monthly lim- it, even by $1, you won't be entitled to any SS benefits for that month. The month- ly test is only in the calen- dar year you claim benefits - it goes away for you in 2020 and you'll be subject to the annual earnings test only for next year. Note that the earnings limits are considerably more if you are claiming in the year you will reach your full retirement age. If this were the year you will reach your full retirement age, the an- nual limit would be $46,920 and the monthly limit would be $ 3910 (these lim- its change annually). How- ever, if you stay fully retired and don't return to work you will not need to worry about the Social Security earnings test but, depending on your "MAGI," you may need to pay income taxes on your Social Security benefits. Social Security Matters Income tax on social security vs. the earnings test The Press-Dispatch 812-354-8500 | www.pressdispatch.net *By enrolling in the Birthday Club, you agree to have your name, town and birth- day, or the person's name and town and birthday of whom you are enrolling, printed in e Press-Dispatch on the week in which the birthday occurs. Joining is easy! Visit pressdispatch.net/birthday or send your full name, address, city, state, zip code, phone number and birthdate to birthdayclub@pressdispatch.net.* Each week, a list of birthdays will be published in the paper! You could win a FREE PRIZE from area businesses and a three-month subscription to e Press-Dispatch. MUST RE-ENROLL EVERY YEAR! Join the One WINNER is drawn at the end of each month Lions give out dictionaries Petersburg third grade teacher Jonna Allen helps Braden Slunder find the longest word in the dic- tionary. The Lions Clubs, of Petersburg and Winslow, handed dictionaries to the third graders at Pe- tersburg Elementary last Wednesday. Then they asked them if they could read the longest work in the dictionary that is more than 1,000 letters long. Lowell Thomas, of the Lions Club, participated in the diction- ary handout as well. Cathy Eckert, of the Lions Club, hands a dictionary to Kylee Query. Harris high fives the Colts Jenna Harris was on the Jumbotron at Lucas Oil Field on Sunday prior to the Indianapolis Colts football game. Harris was invited on the field Sunday afternoon at the Indianapolis Colts football game to be a member of the High Five Squad. The invitation came through the Indiana Soybean Alliance. She gave high fives to the Colts team members as they ran on the field prior to the game. "It was a wonderful expe- rience for her," said her father Randy Harris.