With life expectancy being longer today, it is not uncommon for people to spend 20 or more years in retirement – with much of that time being active and pursuing new opportunities. But if you’re receiving Social Security retirement benefits prior to reaching your “full retirement age,” other income streams could trigger taxes on this income. This, in turn, could reduce the net amount of income you have available to spend.
If you qualify for Social Security retirement benefits, you can file for them as early as age 62. But if you start collecting before you have reached your full retirement age, the dollar amount will be permanently reduced. In addition, the amount you actually put in your pocket could be further diminished by taxes. In this case, by up to 85%.
The taxable amount of these benefits depends on how much you earn from other sources, as well as the way you file your income tax return (i.e., as single, married filing jointly, married filing separately, or head of household).
Social Security Full Retirement Age
|Year of Birth||Minimum Retirement Age for Full Benefits|
|1937 or Before||65|
|1938||65 + 2 months|
|1939||65 + 4 months|
|1940||65 + 6 months|
|1941||65 + 8 months|
|1942||65 + 10 months|
|1943 to 1954||66|
|1955||66 + 2 months|
|1956||66 + 4 months|
|1957||66 + 6 months|
|1958||66 + 8 months|
|1959||66 + 10 months|
|1960 or Later||67|
Source: Social Security Administration
There are a number of income sources that count as “earned income,” and that are considered when determining whether or not your Social Security benefits will be taxed. These include:
- Self-employment earnings
- Any other taxable income
The good news is that rental income is not considered in this determination.
If you’re unsure of how rental income may impact other areas of your financial life, it can help to have a property manager on board who is also a CPA. So, if you own residential rental property in or around the Central Florida area, <give us a call> to learn more about how we can help you!