Rental Income

QUESTION:
One of my clients, a 70 year old male, questioned me whether or not Rental Income is counted towards the taxation/witholding on their social security benefit payments. In reading section 806 I also noticed interest and dividend income may not count towards my clients' benefits. Would I be correct to say that only "Earned Income" is countable towards the reduction of SS income benefit?

Shawn from Pennsylvania

ANSWER:
If you are talking about the taxation of benefits, no, because even unearned income is considered by the IRS to determine whether SS benefits are to be taxed. Section 806 of the Social Security Benefits Handbook discusses earnings that are not counted for the Earnings Test that SSA uses to reduce benefits if the earnings are over the exempt amounts. But this Earnings Test does not even apply to anyone over Full Retirement Age, such as your client.