Everyone must pay appl🀅icable Social Security taxes on income, even those working past full retirement age. On the plus side, working past full retirement age may also increase Social Security benefits in the future because you continue contributing to Social Security through the payroll tax.

Income Can Lower Benefits Temporarily

Continuing to work can actually lower current benefits, if any, taken during the year the 澳洲幸运5官方开奖结果体彩网:full retirement age is reached, according to a Social Security Administration limit (whichꦅ changes every year).

For instance, if the full retirement age is reached in July, the total benefit income earned from January to July must be below the limit, or Social Security benefits are lowered by $1 for every $3 of income over the limit. For 2025, that limit is $62,160, up from $59,520 in 2024.

Additionally, if you are under full retirement age for the entire year, $1 is deducted from your benefit payments for every $2 you earn above the annual limit. For 2024, that limit is $22,320, and it increases to $23,400 in 2025.

That money deducted is held by the Social Security Administration and repaid incrementally once the taxpayer is no longer working. There are no limits on income earned past the month that full retirement age is reached when the full benefit amount is paid no matter how much income is earned.

Taxation of Benefits

Taki🥃ng Social Security benefits while continuing to work may have the unexpected negative consequence of bumping a taxpayer into a higher tax bracket.

In addition, most people forget that a certain percentage of Social Security benefits may be taxed—up to 85%—depending on 澳洲幸运5官方开奖结果体彩网:filing status and combined income (which includes half of your Social Security benefits).

澳洲幸运5官方开奖结果体彩网:Som✱e states also tax Social Sec❀urity benefits. It is possible to have taxes withheld from Social Security benefit payments by filling out IRS Form W-4V or requesting a Voluntary 澳洲幸运5官方开奖结果体彩网:Withholding Request Form online.

As of 2024, Social Security benefits for some beneficiaries could be taxed at the state level in 8 states. If you live in one of those states—Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, or Vermont—check with the relevant  to learn more.

As with the federal tax, how these agencies tax Social Security varies by income and other criteria.

How to Lower Taxes on Benefits

There are several remedies available for those who are taxed on their Social Security benefits. Perhaps the most obvious solution is to reduce or eliminate the interest and dividends that are used in the IRS's pro💞visional income formula (which is the same as the Social Security Administration's combined income definition shown above).

Reduce or Eliminate Interest and Dividends

Therefore, the solution could be to convert the reportable investment income into 澳洲幸运5官方开奖结果体彩网:tax-deferred income, such as from an annuity, which will not show up on the 1040 Form until it is withdrawn. If you have $200,000 in certificates of deposit (CDs) earning 3%, which translates into $6,000 a year, that will be counted as provisional income.

But the same $200,000 growing inside an annuity, with the interest reinvested back into the annuity, will effectively yield a reportable interest of $0 when computing provisional income.

Generally, annuities become taxable income when they are taken as distributions depending on the account type. Therefore, virtually any investor who is not spending all of the interest paid from a CD or other taxable instrument can benefit from moving at least a portion of their assets into a tax-deferred investment or account.

Work Less, Earn Less

Another possible remedy is to simply w♋ork a little less, especially if you are at or near the threshold of having your benefits taxed.

The Bottom Line

If you continue to wo🧸rk after your retirement age, you will continue contributing to Social Security via the payroll tax.

When you start receiving Social Security benefits, they may be taxedꦺ depending on your combined income. It is possible to be taxed at♍ up to either 50% or 85% of your benefits.

There are plenty of strategies 🦹to avoid being taxed, two of which are reducing your work income and reducing income from interest and dividends.