Tuesday, July 1, 2008

Wife's Benefits- Husband's Earnings

My wife will turn 62 in September. I am 62 but am also still working. My income level is in the low 6 digits, hers is zero. I have been unable to find any references to the impact of my income on her benefit. We generally file 1040 as MFJ. Is my wife's benefit impacted by my income and if so what publication would you recommend I review for details. Thank you.
John from South Carolina

Answer- Your wife cannot collect as your spouse on your account if you don’t also apply for benefits. But if your wife has worked the required 40 quarters and is eligible on her own account, your income will not impact your wife’s benefit. However keep your eye on that taxman (“’Cause I’m the taxman, Oh Oh the taxman” as George Harrison put it). The benefits may be subject to taxation as per the usual rules for taxation of SS benefits. When your joint income exceeds $32,000 (this is the limit for married filing a joint return), you pay tax on 50% of the excess income over $32,000 up to $44,000, then 85% of the excess income over $44,000.

And hey John, keep in mind the “non-service” month provision. If your earnings are under the monthly limit for any calendar month you’re over 62, you can get the monthly benefit for any such month. It doesn’t matter whether or not you are retired, only what your earnings are for that particular month or months (including sick and vacation pay).

When you become eligible for benefits, your wife may be entitled to some additional benefits as a spouse on your account, but only if her primary insurance amount (her benefit before the age reduction) is less than one-half of yours. If so, then she can receive the difference up to that one-half amount. But if she is under full retirement age when she becomes entitled to that, the wife’s portion will be reduced for age too, at the wife’s reduction rate, which is a bit greater than the retirement reduction.

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