Does 1099 income affect Social Security benefits?
The truth is that Social Security benefits really don't vary whether you're self-employed or are an employee in a business; the major difference is that self-employed workers must pay both the employee and employer portions of Social Security taxes.
Each must also pay a 1.45% Medicare tax on all earnings. If you're self-employed, you pay the combined employee and employer amount. This amount is a 12.4% Social Security tax on up to $176,100 of your net earnings and a 2.9% Medicare tax on your entire net earnings.
When we figure out how much to deduct from your benefits, we count only the wages you make from your job or your net profit if you're self-employed. We include bonuses, commissions, and vacation pay.
For the earnings limits, we don't count income such as other government benefits, investment earnings, interest, pensions, annuities, and capital gains.
Earned income is any compensation that you receive from a job or self-employment. It can include wages, tips, salaries, commissions, or bonuses. It is different from unearned income, which comes from sources like investment profits or government benefits. The two types of income are taxed differently by the IRS.
(NewsNation) — There is no limit on how much you can earn while receiving Social Security benefits if you have reached full retirement age, but if you choose to receive Social Security before that age, your benefits could be reduced.
Substantial income includes wages, earnings from self-employment, interest, dividends, and other taxable income that must be reported on your tax return. Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. More than $34,000, up to 85% of your benefits may be taxable.
Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes. You may need to pay income tax, but you do not pay Social Security taxes.
- No. 1: Keep working while taking benefits early. ...
- No. 2: Be a substantially lower-earning spouse. ...
- No. 3: Be alive in 2034. ...
- Social Security still provides an important foundation for retirement.
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
What types of income are not considered earned income?
- Pay you got for work when you were an inmate in a penal institution.
- Interest and dividends.
- Pensions or annuities.
- Social Security.
- Unemployment benefits.
- Alimony.
- Child support.
A 1099-MISC is a type of tax form. It is used to report miscellaneous income for individuals and companies who have been paid $600 or more in non-employee service payments during a calendar year with the exception of royalty payments of $10 or more.
Other Income Not Subject to Self Employment Tax
Occasional sources of income, such as a one-time transaction, do not count as trade or business income under the rules of the IRS, as the activity does not occur regularly or frequently. In addition, there is no effort to continue the activity on a consistent basis.
Social Security withholds benefits if your earnings exceed a certain level when you're under your full retirement age. In 2024, the annual exempt amount is $22,320 for recipients who aren't at their full retirement age. Anyone making more than that has $1 in benefits withheld for every $2 of earnings they're over.
A self-employed person is both the employee and the employer for Social Security purposes, so you're responsible for withholding 12.4% in Social Security taxes from your earnings if you're self-employed. You must contribute both the employer's portion of Social Security (6.2%) and your own portion (6.2%).
Your benefit might be reduced if you get a pension from a government employer who wasn't required to withhold Social Security taxes. This reduction is called the “Government Pension Offset” (GPO).
For the Social Security Administration (SSA) earnings test, "income" specifically refers to work earnings.
If your spouse dies, do you get both Social Security benefits? You cannot claim your deceased spouse's benefits in addition to your own retirement benefits. Social Security only will pay one—survivor or retirement. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher.
| Year | Lower amount a | Higher amount b |
|---|---|---|
| 2023 | 21,240 | 56,520 |
| 2024 | 22,320 | 59,520 |
| 2025 | 23,400 | 62,160 |
| a Applies in years before the year of attaining NRA. b Applies in the year of attaining NRA, for months prior to such attainment. | ||
At what age is Social Security no longer taxable? Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
Do I have to file a tax return if I only receive Social Security?
Generally, if Social Security benefits were your only income, your benefits are not taxable and you probably do not need to file a federal income tax return.
You report the taxable portion of your Social Security benefits on line 6b of Form 1040 or Form 1040-SR. Your benefits may be taxable if the total of (1) one-half of your benefits, plus (2) all of your other income, including tax-exempt interest, is greater than the base amount for your filing status.
The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
Independent contractors have no Social Security and Medicare withholding, but they need to take care of their own federal tax returns.
Just because you don't bring home a paycheck doesn't mean you're not working. A stay-at-home parent can get a Social Security check just like any other worker.
