If you're drawing Social Security while working, earned income can reduce your monthly retirement benefits until you reach full retirement age. After that age -- which will fall between 65 and 67, depending on when you were born -- you can earn any amount without losing benefits. Unearned income doesn't count, and the Social Security Administration has special rules governing self-employment and rental income.
What Counts and What Doesn't
As on 2015, you can earn $15,720 annually before your Social Security income is impacted. Wages from employment and net income from self-employment count toward the Social Security earnings limit, but income from investments doesn't count. This means interest earnings, earnings from stocks, bonds and mutual funds and capital gains don't count. Annuities, pensions and government benefits other than Social Security are also excluded. However, your contributions to a retirement plan count if they're part of your gross income.
The Internal Revenue Service considers you a real estate dealer if you're in the business of selling real estate for a profit. Any rent you receive on properties you buy for resale is self-employment income, and it counts toward the earnings limit.
If you're not a real estate dealer, income from renting living spaces such as houses or apartments is normally excluded in computing your earnings limit because it's investment income. You're allowed to provide routine services on these investment properties, such as routine maintenance and cleaning of public areas.
However, if you rent living spaces and also provide extra services beyond routine maintenance, this is self-employment income and counts toward the earnings limit. For example, rents for hotel and motel rooms count because you're providing cleaning and linen services for the convenience of the renters. Rental income from storage units, warehouses or parking spaces also counts toward your earnings limit as self-employment income.
When to Report Earnings
Social Security counts your wages as an employee in the year you earn them. If you receive sick pay, a bonus or vacation pay in the year after you earn it, it still counts when you earn it. On the other hand, self-employment income usually counts in the year you receive it. The exception is self-employment income that you earned in the year before you qualified for Social Security. It doesn't count even if you receive it after you qualify.
How Much You'll Lose
If you're younger than full retirement age for an entire year, Social Security reduces your benefits by $1 for every $2 in earnings above the earnings limit -- $15,720 as of 2015. If you reach your full retirement age during the year, Social Security takes away $1 in benefits for every $3 you earn over $41,880 until your birthday month. These amounts are current as of 2015. A special exemption applies if you retire in the middle of a year. As a general rule, you'll receive full benefits for any month during which you're retired and receiving less than $1,300 monthly from employment. Self-employed people can also qualify for full benefits mid-year if they retire by reducing their hours and responsibilities.
If you're receiving Social Security while working but haven't reached full retirement age, Social Security recommends that you report any change in your earnings immediately. The government may need to adjust your benefits and also any benefits based on your record going to your family members.
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