social security advice needed

[husker71]

I just turned 61 years and 9 months this week   I have a business that makes money BUT I think I can get it down to under the $15,000 threshold to avoid taxes  (rental property)  My wife makes just over $30,000 at her job (maybe a little less this year)  I would happily pay for an hour of an experts time on this but just seem to get those who say wait till 66 or 70    that may not be an option  any help appreciated   PS  could my wife and I file separate tax forms???

[widespreadsooie]

I just turned 61 years and 9 months this week   I have a business that makes money BUT I think I can get it down to under the $15,000 threshold to avoid taxes  (rental property)  My wife makes just over $30,000 at her job (maybe a little less this year)  I would happily pay for an hour of an experts time on this but just seem to get those who say wait till 66 or 70    that may not be an option  any help appreciated   PS  could my wife and I file separate tax forms???

You can file separately, but under normal circumstances that isn't usually beneficial.

[HawgWild]

Years back I had a financial advisor that told me to retire at 62 and begin taking SS. I had a decent retirement savings and she said I'd have to live past 81 to experience any downside to claiming this early. I read an article once that said there was something like 88 different combinations for married couples to claim SS. Confusing? Yes. To me, the biggest concerns were bridging health care costs from when I retired until I'd turn 65 and reducing outstanding debt. If you have these under control then you can make a more informed decision.

[Arkansasbeaux]

Here's a couple of issues that come up with clients of mine about social security...The first is always about WHEN to start taking it. Obviously, if a person is still working and will be making more than the allowable amount ($15,720 for 2015), then it makes no sense to draw early. However, you said that shouldn't be an issue. So lets take it a bit further. Yes, at 66 up to 70 your monthly amount will increase. However, there are a couple of considerations that must be looked at. First, no one truly knows how long they will live or the QUALITY of their next few years. What I am referring to is a breakeven point. I don't have your numbers so I can't give you an exact age, but most people have a breakeven at around age 76 to age 78. What I mean is that the amount you draw at 62 is about 25% less than at 66, yet you now have a 4 year head start. Think about it like this. If your amount at 66 is $2000, then at 62 you would get about $1500. $1500 x 48 month head start is $72,000. Then take the $500 per month difference and divide the 72k by it (72,000/500=144 months, or 12 years). What this means is that someone drawing at age 62 vs 66 would actually draw the same total amount of money by age 78. Granted, this is a general estimate and doesn't take into account inflation adjustments. Now, does that mean you should take it early? Well, that's a personal preference. at 78 your health may be bad and you would have been able to enjoy the money sooner rather than later. Then again, that may not be the case. An additional consideration is the amount of income for the surviving spouse once the first one passes away. The surviving spouse will get the higher amount but the lower amount will be gone. So if the combined soc sec income was 3k per month, the surviving spouse would lose 1k of monthly income (assuming one spouse made 2k and the other 1k per month). There are many factors to look at and it is a personal decision based on your specific needs and concerns. It is one of the most challenging decisions to make and, once it's made, cannot be changed. This doesn't even get into the topic of the 50% spousal benefit if one spouse is a much higher earner than the other. Keep in mind, that generally rental income is considered passive (or unearned) if you are not actively involved in the process, which would make the $15,720 a moot issue. I hope that helps a little. Please feel free to ask me a question on here or through PM, whichever you prefer.

[husker71]

here is my problem    I own rental property which I found out can be classified as passive income and does not count against my social security.  BUT  (and there is always a but)   all mine pay by the week and thus I am told they will count against me    I have to go weekly to keep full and normally always am full  this and my wife has a job making about $30,000   this is my problem   don't want to give it all back in taxes

[hog.goblin]

I just turned 61 years and 9 months this week   I have a business that makes money BUT I think I can get it down to under the $15,000 threshold to avoid taxes  (rental property)  My wife makes just over $30,000 at her job (maybe a little less this year)  I would happily pay for an hour of an experts time on this but just seem to get those who say wait till 66 or 70    that may not be an option  any help appreciated   PS  could my wife and I file separate tax forms???

you are really asking 2 different questions:

1) Can I keep my earned income low enough to avoid having to surrender (re-pay) social security benefits?  That's far worse than paying tax on it.  This is the $15,720 threshold and your non-earned income, wife's income, and total income is irrelevant in the calculation.

2) How much tax do I have to pay on my benefits?  This is directly impacted by your other income, earned or passive, and your wife's income.  Married filing separate is even worse, as your social security benefits become taxable with the first dollar of income you have.

Now, back to #1, normally rental property is passive and therefore not earned income for social security benefit purposes.  Even when rental property is non-passive, it's rarely considered earned income.

I would argue the frequency of your rent payments is irrelevant, but the services you provide are relevant.  For example, renting equipment or personal property is earned income.  Renting short-term lodging (think hotel) is earned income.

From the IRS:  Providing substantial services is the key IRS language.  If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business (Sole Proprietorship). Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. For information, see Publication 334, Tax Guide for Small Business. You also may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax.