At 73 and Still Working Full Time, Can You Avoid Social Security Taxes?
A 73-year-old full-time worker fears an unexpected tax bill on Social Security benefits. Here's what to know about the rules.
A 73-year-old still pulling a full-time paycheck is asking a question that stumps many older Americans: is there any way to avoid paying federal income tax on Social Security benefits when earned income keeps climbing? The worker told MarketWatch that weekly earnings are higher now than at any point in their career — a financial success story that comes with a complicated tax twist.
Social Security benefits become partially taxable once a recipient's combined income — which the IRS defines as adjusted gross income plus nontaxable interest plus half of Social Security benefits — crosses certain thresholds. For single filers, up to 50% of benefits may be taxed above one income level, and up to 85% may be taxed at a higher threshold. Married filers face their own set of brackets. For a 73-year-old still earning a robust salary, staying below those thresholds is likely difficult without deliberate tax planning.
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Strategies financial advisors often discuss in this context include adjusting the timing of retirement account withdrawals, redirecting savings into Roth accounts to reduce future taxable income, and carefully managing other investment income. However, there is no blanket exemption from Social Security taxation simply because a recipient is elderly or has already paid into the system for decades. The tax applies based on income level, not age or work status.
The concern about an unexpected tax bill is well-founded. Retirees and older workers who do not have federal taxes withheld from Social Security checks — or who underestimate their combined income — can face a lump-sum liability at filing time. Setting up voluntary withholding directly from Social Security payments or making estimated quarterly tax payments are two ways to prevent a year-end surprise.
For a worker in this position, consulting a tax professional or certified financial planner who specializes in retirement income could be especially valuable, given the intersection of earned income, Social Security, and potential Medicare premium surcharges that higher earners also face. Continue reading at MarketWatch.com
