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Millions of people with disabilities as well as retirees depend on Social Security payments for part or all their support. If you receive Social Security benefits, the amount you receive can be reduced based on your other income. In addition, the amount you have to spend might be less if the other income causes some of your benefits to be taxable.
When a person reaches the full retirement age set by the Social Security Administration, her benefits are not reduced due to income. As of 2013, full retirement age is 66. You can opt to start early benefits as early as the month you turn 62. However, until you reach full retirement age, any other earned income results in a reduction in benefits if you earn more than a threshold set by the Social Security Administration. The limit is $15,120 as of 2013. You lose $1 of benefits for every $2 you earn over the limit. You eventually get these "lost" benefits because your benefit amount is increased to compensate when you reach full retirement age.
The Social Security Administration only counts earnings from work, such as wages, salary or self-employment income, to determine if your benefits will be reduced. Other government benefits, pensions and annuity payments do not count. Interest income and capital gains from investments are also excluded.
Income limits for receiving disability benefits are different from those that apply to retirement payments. If you qualify for Social Security Disability Insurance payments, you can earn up to $1,040 per month as of 2013 without affecting your benefits. For visually impaired people, the limit is $1,740. If you earn more, you may lose eligibility for SSDI benefits. If you are not qualified for SSDI, you may receive Supplemental Security Income payments. SSI programs are administered by individual states, so cutoff limits vary. In general, if you earn too much, SSI benefits are gradually reduced and eventually eliminated as your income goes up.
Benefits and Taxes
The Internal Revenue Service can’t reduce your Social Security retirement benefits. However, part of your benefits might become taxable based on your other income, so the amount you keep is reduced. To find out if this rule applies, add one-half of your yearly retirement benefit to your adjusted gross income. If the total comes to $32,000 or more, you are married, and you file a joint return, at least 50 percent of your benefits are taxable. If your filing status is single, the limit is $25,000.