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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I will be 71 in Nov., am working full time @135k, drawing SS26k

Customer Question

I will be 71 in Nov., am working full time @135k, drawing SS26k and dividend income 27k.
File joint return with wife SS12k and have two depedents (retarted suster & brother in my care)

Would I be better off to work part time and at what point would I not be taxed on SS
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello camperrw,

There is an actual worksheet that needs to be completed in order to determine how much of your SS benefits may be subject to tax. But basically, this is how it works.

You must take the total amount that you and your wife are receiving in SS benefits, which would be $38,000. Your base amount as a married couple is $32,000. Subtract half of your combined SS earnings ($19,000) from the base of $32,000, and the result ($13,000) is what you are allowed to have in additional income without any of your SS benefits being taxable.

Your dividend income alone of $27,000 already exceeds the $13,000 allowed, so even if you were to quit working entirely, part of your SS benefits would still be taxable ($7,700 to be exact is what would be subect to tax, even without working).

The most of your SS benefits that can ever be subject to tax is 85%, so in your case, $32,300 of you and your wife's combined benefits could be subject to tax depending on your total other income. You would hit this highest rate once your total income from wages, dividends and other sources reaches $55,940. You already have $27,000 in dividends alone, which means that if you work and have earnings of $28,940, then $32,300 of your SS benefits are taxable, which is the maximum allowed by law.

Once your earnings exceed the $28,940, then you are just paying taxes on the extra income, as you have already reached the maximum of what they can tax you on as far as your SS benefits go.

To drop from a job making $135,000 a year to one making $28,940 a year would obviously result in lower taxes being paid, but then again you would be giving up a significant amount of income. So it really depends on just what you feel you need to keep bringing in at this point in order to maintain the standard of living that you want to keep.

If this was helpful please press the Accept button.

Thank you camper and let me know if you have more questions.