January 19, 2016 in Taxes

What happens if I exceed the Social Security earnings limit? Will I owe taxes?

Dear Tax Talk,

If you turned 64 in 2015 and collected Social Security retirement benefits and worked $31 over the limit allowed, how much money are you taxed on ? What is the Social Security earnings limit?

— Annie


Dear Annie,

Exceeding the Social Security earnings limit may result in taxes and, depending on your age, could also result in cut benefits.

The taxability of Social Security benefits is a function of your IRS filing status and your “combined income.”

The IRS has a work sheet in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, that goes through 19 steps to calculate your taxable benefits.Here is a summary of that process:

What is “combined income”?

Combined income is the sum of your adjusted gross income, tax-exempt interest and half of your annual Social Security benefit.

Another issue with respect to an earnings limit could come into play if you work, receive Social Security retirement benefits and are younger than full retirement age. Here’s how it works:

Your full retirement age depends on when you were born. In your particular situation, your full retirement age is 66.

You earned $31 over the earnings limit, so the adjustment to your Social Security income is $15.

The good news is that as you continue to work and pay Social Security taxes, the Social Security Administration will review your records every year to determine whether your additional earnings will increase your monthly benefit.

Thanks for the great question and all the best to you.

Ask the adviser

To ask a question on Tax Talk, go to the “Ask the Experts” page and select “Taxes” as the topic. Read more Tax Talk columns.

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.