The earnings limit depends on whether you have reached your full retirement age

Social Security reduces your monthly payment if you earn above a certain amount before you reach your full retirement age — the age at which you may have access to for your unreduced benefit. The limit changes each year. In 2024, if you have not yet reached full retirement age, Social Security deducts $1 from your benefit for every $2 you earn above $23,400. Once you reach full retirement age, there is no earnings limit at all, and you can work and collect your full benefit with no reduction.

The year you reach full retirement age has a different rule. From January through the month before you turn full retirement age, Social Security deducts $1 for every $3 you earn above $62,400 (in 2024). Starting the month you reach full retirement age, the earnings limit disappears entirely.

These limits explore only to earned income — wages from a job or net profit from self-employment. They do not explore to pensions, investment income, rental income, or annuities. If you are collecting Social Security and working part-time, only your wages count toward the limit.

Key Takeaways

  • Before full retirement age, Social Security deducts $1 from your benefit for every $2 you earn above $23,400 per year (2024 limit).
  • In the year you reach full retirement age, the limit is higher ($62,400 in 2024) and applies only to earnings before the month you turn that age.
  • Once you reach full retirement age, you can earn any amount without losing any Social Security benefit.
  • Only earned income from wages or self-employment counts; pensions, investments, and rental income do not affect your benefit.
  • The earnings limits increase each year based on changes to the national average wage index.

How Social Security calculates the reduction

Social Security uses a straightforward formula. If you are under full retirement age for the entire year and earn $30,000, you have earned $6,600 above the $23,400 limit. Social Security divides that by 2, which equals $3,300. That amount is deducted from your annual Social Security benefit.

The deduction comes out of your monthly payments. If your annual benefit is $18,000 ($1,500 per month), and the deduction is $3,300, Social Security reduces your annual benefit to $14,700 ($1,225 per month). The reduction continues until your earnings for the year drop below the limit or you reach full retirement age.

Social Security reports your earnings to them — you do not have to report it yourself. When you file your tax return, the IRS shares wage information with Social Security. If you are self-employed, you report your net earnings on your tax return, and that figure is what Social Security uses.

What counts as earned income and what does not

Earned income is money you receive for work you perform. This includes wages from an employer, tips, bonuses, and commissions. If you are self-employed, it includes your net profit after business expenses. Earned income also includes certain royalties and rental income if you actively participate in managing the property.

These do not count toward the earnings limit: Social Security benefits, pensions, annuities, investment income (dividends, interest, capital gains), rental income from property you do not actively manage, insurance payouts, and inheritances. If you receive a pension from a job where you did not pay Social Security taxes — such as some government jobs — that pension does not count either.

Vacation pay, sick pay, and bonuses paid after you stop working do count as earned income in the year you receive them, even if you earned them in a previous year. This matters if you retire mid-year and receive a lump-sum payout.

When the earnings limit stops explore

The earnings limit ends the month you reach your full retirement age. Full retirement age is 66 for people born between 1943 and 1954, 67 for people born in 1960 or later, and somewhere in between for those born in other years. The Social Security Administration website has a table showing the exact age for your birth year.

Once you reach that age, you can earn any amount without any reduction to your benefit. This is true even if you claimed Social Security early — at 62, for example — and were subject to the earnings limit for several years. The limit straightforward stops explore.

If you have been receiving a reduced benefit because of the earnings limit, your benefit does not automatically increase when you reach full retirement age. Social Security recalculates your benefit to account for the months you received a reduced amount, and your new full benefit reflects that history. You do not get back the money that was withheld.

How to estimate your benefit reduction

To estimate whether the earnings limit will affect you, start with your expected annual earnings for the year. Subtract the limit for your age ($23,400 if you are under full retirement age all year, or $62,400 if you reach full retirement age during the year). If the result is zero or negative, the limit does not affect you.

If the result is positive, divide it by 2 (or by 3 if you reach full retirement age during the year). That is your estimated annual reduction. Divide the annual reduction by 12 to see the approximate monthly reduction.

Example: You are 64, claim Social Security, and plan to earn $35,000 this year. The limit is $23,400. You are $11,600 over the limit. Divide by 2: $5,800. That is your estimated annual reduction. Divided by 12 months, that is roughly $483 per month less in benefits.

Strategies if you are working and collecting Social Security early

If you claimed Social Security before full retirement age and are still working, you have a few options to consider. One is to work part-time or reduce your hours in years when you are close to the earnings limit. Another is to delay claiming Social Security until you reach full retirement age, though this works only if you have not yet claimed.

If you have already claimed and the earnings limit is reducing your benefit significantly, you can ask Social Security to suspend your benefits temporarily. This stops your payments but allows your benefit to grow. When you resume collecting, your monthly amount will be higher. This option is available only if you have reached full retirement age.

Some people claim Social Security at 62, work for a few years while their benefit is reduced by the earnings limit, and then reach full retirement age when the limit ends. At that point, their benefit recalculates and increases. This can make sense if you need income now and expect to earn less later, or if you want to delay the larger increase that comes from waiting past full retirement age.

The earnings limit and your taxes

The earnings limit is separate from the tax treatment of Social Security. Even if your earnings do not trigger the earnings limit, part of your Social Security benefit may be taxable depending on your total income. The IRS looks at your "combined income" — adjusted gross income plus non-taxable interest plus half your Social Security benefit — to determine whether your benefits are taxed.

Earned income counts toward combined income. So does investment income and certain other sources. If your combined income exceeds $25,000 (or $32,000 if you are married filing jointly), up to 50 percent of your Social Security benefit may be taxable. If it exceeds $34,000 (or $44,000 if married filing jointly), up to 85 percent may be taxable.

This is different from the earnings limit. You could have earnings low enough to avoid the earnings limit but high enough to make your Social Security taxable. Conversely, you could exceed the earnings limit but have low combined income if your other income sources are small.

Frequently Asked Questions

Do I have to report my earnings to Social Security?

No. The IRS reports your earnings to Social Security when you file your tax return. If you are self-employed, your net earnings from Schedule C are what Social Security uses. You do not need to contact Social Security to report your income.

What if I earn more than the limit but only for one month?

The earnings limit is annual, not monthly. If you earn $50,000 in one month and nothing the rest of the year, you are still over the limit for the full year, and Social Security will reduce your benefit accordingly. The reduction is spread across all 12 months of payments.

Can I work for myself and avoid the earnings limit?

No. Self-employment income counts the same way as wages. Your net profit from self-employment is subject to the earnings limit if you are under full retirement age. You report this on Schedule C of your tax return, and Social Security uses that figure.

Does my spouse's earnings affect my Social Security?

No. The earnings limit applies only to the person collecting Social Security. Your spouse's income does not reduce your benefit. However, if your spouse is also collecting Social Security, the earnings limit applies separately to their benefit based on their own earnings.

What happens if I underestimate my earnings and go over the limit?

Social Security will adjust your payments when they receive your tax return. If you were paid too much during the year because you underestimated your earnings, Social Security will either reduce future payments or ask you to repay the overpayment. It is better to overestimate and receive less than to underestimate and owe money back.