Many retirees plan to earn extra income to supplement their retirement spending. But how much can a retired person earn without paying taxes? The answer to this question varies based on your situation. Understanding the tax rules surrounding retiree income can help avoid an expensive surprise when tax time rolls around.
When Does a Retiree’s Income Trigger Taxes?
Retirees who are still working likely have at least two streams of income: Social Security benefits and a paycheck from a job. The Social Security benefits you receive can be taxable if 50% of your benefits, plus all of your other income, is greater than the specific limits for your filing status. These amounts are as follows:
- Single filers, qualifying widowers and heads of households bringing in more than $25,000, based on the math above, may have to pay taxes on their Social Security benefits.
- Married couples filing separately that have lived apart for an entire year who bring in more than $25,000, based on the math above, may have to pay taxes on their Social Security benefits.
- A married couple filing jointly bringing in more than $32,000, based on the math above, may have to pay taxes on their Social Security benefits.
With that, the benefits you receive may or may not be taxable based on your other income. For example, let’s say that you are a single filer that received $20,000 in Social Security benefits. Additionally, you earned $20,000 at a part-time job. When you run the numbers, 50% of your benefits plus your other income would be $30,000. With that, Uncle Sam would require you to pay federal taxes on a portion of your Social Security benefits.
(Click Read More to view information on married couple filing jointly)
*Article from yahoo! finance
Written by Sarah Sharkey