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Social Security 2022 Fact Sheet

Social Security 2022 Fact Sheet

On October 13, The Social Security Administration released its 2022 fact sheet. Let’s look at some of the important provisions to consider when planning with our clients.

The tax rate, including Medicare, remains at 7.65% for employees and 15.30% for self-employed taxpayers. It is worth mentioning that the additional .9% Medicare tax implemented back in 2013 still applies when an individual earns more than $200,000 or $250,000 for married couples who file a joint return.

The maximum amount of earnings subject to Social Security Tax in 2022 increases to $147,000 from $142,800 in 2021. Remember that Medicare tax is unlimited, therefore it never is phased out on a taxpayer’s earned income.

Thinking of taking benefits before full retirement age (FRA)? For those of you out there (like myself) who will hit the magical age 62 in 2022, we can take benefits beginning next year, but be advised we are below the FRA, which is age 67 if you were born in 1960 or later.

Two factors to consider if you decide next year is when you will take your benefits:

  1. If you are turning 62 in 2022, you will receive 70% of the benefits (a 30% reduction) you would receive at FRA (age 67). If you decide to take your benefits sometime after age 62 but before FRA, your reduction will be less.
  2. If you are still working prior to FRA and taking your Social Security benefits, you are limited to earning $19,560 per year ($1,630 per month) in 2022, which is up from $18,960 ($1,580 per month) in 2021. If your earned income exceeds this amount, you will lose $1 in benefits for every $2 in earnings above the limit. Remember that this limit applies to your EARNED income such as wages or net income from self-employment. Other sources of income may cause the Social Security benefits you receive to be taxable but losing benefits before reaching FRA is only impacted by your EARNED income. After reaching FRA, future earnings no longer reduce benefits; you can earn as much as you please but that doesn’t mean benefits won’t be taxable.

Let’s consider a couple of planning ideas within the statements I just made. Note that I gave you not just the annual limit to earnings when you are under FRA, but also the monthly amount. It’s important to be aware that adjustments to your benefits are determined by your monthly income. If you are taking your benefits early and were perhaps thinking of working next year just during tax season and are convinced you can make $19,560 and not lose benefits for that first four months of the year, you would be wrong since the monthly limit of $1,630 per month applies. A strategy to employ, assuming you are an employee and lucky enough not to own your practice any longer, is to have the money you earned spread out over the course of the year so as not to exceed the $1,630 per month limit.

Another point I want to make is that when you have to pay back benefits because you earned too much during your years prior to FRA, when you do reach FRA (again age 67 for those of us born in 1960 and after), Social Security will recalculate your FRA benefits for those amounts you paid back. It would appear then that taking your benefits early is not a completely ridiculous consideration for those of us who are still working.

Some other Social Security tidbits:

  1. For 2022, to earn a quarter of coverage you need $1,510, up from $1,470 in 2021. You cannot pick up more than four quarters of coverage in any one year. By the way, for self-employed persons it’s the amount of earnings subject to Social Security that count toward the quarterly credit, not the gross amount. In other words, you use the 92.35% of the net earnings from self-employment used on Schedule SE, Line 4a to determine the amount which earns quarters of coverage
  2. For those of you who are considering taking your benefits in the year you reach FRA, in 2022 your earnings prior to the time you start your benefits is limited $51,960, up from $50,520 in 2021.
  3. For you or your clients already receiving benefits, you are going to receive a 5.9% cost of living adjustment (COLA) starting in January…. enjoy!
  4. If you wish to delay your benefits until you reach age 70, you will receive 124% of your FRA benefit. Again, I’m using someone born in 1960 as the example here. Tell me how long you plan on living and I’ll tell you which strategy makes more sense, taking benefits early or waiting until age 70.
  5. While when you take benefits has a great deal of flexibility, don’t forget you are Medicare eligible at age 65, regardless as to when you reach FRA for Social Security purposes.
  6. Be informed! Advise your clients as well as yourself, to establish personal online access to your actual Social Security records and benefit projections by going to gov rather than speculating about any what, when, and how much scenarios.

Age with grace and style my friends and think young thoughts…after all, we are only as old as we feel or act…

By Tom O’Saben EA

Disclaimer: The information referenced in Tax School’s blog is accurate at the date of publication. You may contact if you have more up-to-date, supported information and we will create an addendum.

University of Illinois Tax School is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information. This blog and the information contained herein does not constitute tax client advice.

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