Social Security benefits provide a source of financial stability for millions of Americans, but often, those receiving Social Security are unsure of how their payments are categorized in terms of income and taxes. This becomes further complicated when someone who receives Social Security benefits is seeking Medicaid or Medicare health insurance. Because some programs include income restrictions for eligibility, many people wonder if those who collect Social Security benefits can qualify for additional benefit programs.
Does Social Security Count as Income?
In simple cases, Social Security benefits are not taxed and are not counted as income by the Internal Revenue Service (IRS). This means that if Social Security payments are the only means by which an individual subsides, he or she does not need to report the payments as income, and these payments should not effect eligibility for medical benefit programs based solely on income restrictions since tax return filing documents are the standard by which the government measures income.
Receiving Social Security While Working
Due to retirement age standards, it is entirely possible that you are able to receive Social Security payments while still earning a paycheck from a job. This paycheck would count as income in most cases, but this will depend on the tax filing income limitations for the filing year when it comes to reporting income. If you do not earn enough income to meet the standards for the filing period, you may not have to report the money you earned. In situations where you have Social Security payments in conjunction with an income that meets the tax filing limitations, only the income will be counted toward your total when being considered for income-related medical benefits.
What Other Sources of Income Can Count?
Aside from earning a paycheck at a job, there may be other forms of money coming in that may count as income under tax and Medicare and/or Medicaid rules. These forms of income may include capital gains, revenue from a rental property or residual payments for previous works. If you have these types of income, the amounts and timing of disbursem*nt may affect your financial standing under the rules of any type of government benefit program. Income payments that are taxable may also have their own special rules regarding percentages and timing of tax payments, so be mindful of the rules governing your case if you have any type of income aside from Social Security payments. This is especially true for retirees who are receiving a pension or are withdrawing money from a retirement fund.
Your Financial Responsibility
If you’re a retiree who is drawing Social Security but have additional income, you may be placed into a higher bracket. As of 2019, individuals who report earning more than $85,000 were required to pay more for Medicare Part B (Medical Insurance) premiums. This equates to $170,000 per year for married couples filing jointly. As income levels continue to rise above either $85,000 or $170,000, there is an increase in premium payments for Part B. According to the Social Security Administration, these increases only affect roughly five percent of retirees who receive medical benefits.
Speak With a Tax Professional
Even if your situation seems simple, it’s a good idea to speak with a financial professional in order to determine whether you will need to pay more for healthcare benefits and whether your income is considered taxable. Even if Social Security is your only source of funds, there may be other circ*mstances that either inhibit or enhance your ability to receive Medicaid or Medicare. Whether you’ve applied for additional benefits and been turned down, or you have questions about future earning potential, it’s best to consult with a professional who specializes in finance and tax law.
Related articles:
