I understand there are tax penalties for earning money in addition to your social security income. I've read different and conflicting information on this subject. For example: One site says that income does not include capital gains and only wages or salary is included in your income when figuring your total income. Another site says capital gains is included in your total income. I would like to know which of those is correct.
Also, when total income is figured in order to come up with the number SSA uses to decide how much of your SS income is taxable, do they include your SS income in that figure? Also, is that "taxable" income only? In other words, if you contribute to your company's 401(k) plan, is that income included in the total income figure, even though it's not taxable? if so, it seems an individual could up their contribution percentage at some point in the year to keep their total income below the threshold of taxability.
I hope someone can provide answers to these questions.
Earnings limit and reduction in Social Security benefits
When you say "taxes on Social Security" there are at least two different aspects :
Sounds like you're talking about the later.
If you are younger than full retirement age, there is a limit to how much you can earn and still receive full Social Security benefits. If you are younger than full retirement age during all of 2011, the SSA will deduct $1 from your benefits for each $2 you earned above $14,160.
If you were born January 2, 1943, through January 1, 1955, then your full retirement age for retirement insurance benefits is 66. If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn.
http://www.ssa.gov/pubs/10069.html