Social Security credits are based on the amount of your earnings. Not all income qualifies for credits. In 2019, you will receive one credit for each $1,360 of earnings, up to a maximum of four credits for the year. The amount necessary to qualify for earnings increases with each year. For a person born in 1929 or later, it takes a minimum of 40 work credits (10 years of part-time work) to qualify for a Social Security retirement credit; of course, there are exceptions to this rule as with all Social Security rules.
There is also an annual limit to the amount of income Social Security taxes are applied; that amount in 2019 is $132,900. So, if your salary is over this limit, anything above the limit is not subject to the Social Security, but still subject to Medicare taxes. This does not have an effect on your work credits required, but it certainly has an effect on the increase to your Social Security benefit.
Things that do count for credits:
2. Cash tips of $20 or more per month, but only if reported on your Federal Tax Return.
3. Severance packages with accrued vacation pay and bonuses.
4. W-2 wages and self-employment income as reported by a sole proprietor, certain shareholders or partner.
5. Special rules for domestic work, farm work and work for a church that does not pay Social Security taxes.
6. Military wages – additional credits can be assigned under certain conditions.
7. Advances on future wages as long as the future wages are a type of income that qualify.
Things that do not count for credits:
1. Wages for federal employees not paying Social Security taxes (since 1983, all federal employees have paid the Medicare hospital insurance part of the Social Security tax).
2. Railroad employees with more than 10 years of service.
3. Employees of some state and local governments that chose not to participate in Social Security.
4. Children younger than age 21 who do household chores for a parent (except a child age 18 or older working in the parent’s business).
5. Investment income or capital gains.
6. Any gift or loan you receive, even if from your former employer, does not count toward credits (whether property or cash).
It is important to most to focus on types of income that will boost your Social Security benefits. It is also important to review your annual earnings history each year to make sure that what is reported, is actually what your earned. This mistake falls back on you as it can be corrected if found, and if not found will result in a lower Social Security benefit for life.
Pillars LLC is in the Corinth, MS area but service all 50 states. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years. You may contact them at firstname.lastname@example.org, on their website at www.pillarsllc.com or call at 601-954-0699. KNOW before you GO!!