Annual Statistical Supplement, 2003

History of Effects of Current Earnings and Taxation of OASDI Benefits

Table 2.A29 Earnings (retirement) test, by year enacted
Year
enacted		 Effective
year		 Beneficiaries
exempt		 Earnings
subject
to test		 Amount permitted
without reduction
in benefits
(exempt amount)		 Reduction in monthly benefit a
Annual
earnings
(dollars)		 Monthly
wages b
(dollars)
For all beneficiaries
1935 . . . . . . Covered . . . . . . Full monthly benefit
1939 1940 . . . . . . . . . 14.99 . . .
1950 1951 Aged 75 or older . . . 600 c 50.00 . . .
1952 1953 . . . . . . 900 c 75.00 . . .
1954 1955 Aged 72 or older All d 1,200 80.00 One month's full benefit for each $80.00 or fraction thereof
1956 1958 Disabled . . . . . . . . . . . .
1958 1959 . . . . . . . . . 100.00 . . .
1960 1961 . . . . . . . . . . . . $1 for each $2 of earnings from $1,201–$1,500
$1 for each $1 of earnings above $1,500
1961 1962 . . . . . . . . . . . . $1 for each $2 of earnings from $1,201–$1,700
$1 for each $1 of earnings above $1,700
1965 1966 . . . . . . 1,500 125.00 $1 for each $2 of earnings from $1,501–$2,700
$1 for each $1 of earnings above $2,700
1967 1968 . . . . . . 1,680 140.00 $1 for each $2 of earnings from $1,681–$2,880
$1 for each $1 of earnings above $2,880
1972 1973 . . . Up to age 72 2,100 175.00 $1 for each $2 of earnings above $2,100
1973 1974 . . . . . . 2,400 200.00 $1 for each $2 of earnings above $2,400
1975 2,520 e 210.00 e $1 for each $2 of earnings above $2,520
1976 2,760 e 230.00 e $1 for each $2 of earnings above $2,760
1977 3,000 e 250.00 e $1 for each $2 of earnings above $3,000
For beneficiaries who have not reached full retirement age f
1977 1978 . . . . . . 3,240 e 270.00 e $1 for each $2 of earnings above $3,240
1979 3,480 e 290.00 e $1 for each $2 of earnings above $3,480
1980 3,720 e 310.00 e $1 for each $2 of earnings above $3,720
1981 4,080 e 340.00 e $1 for each $2 of earnings above $4,080
1982 4,440 e 370.00 e $1 for each $2 of earnings above $4,440
1983 4,920 e 410.00 e $1 for each $2 of earnings above $4,920
1984 5,160 e 430.00 e $1 for each $2 of earnings above $5,160
1985 5,400 e 450.00 e $1 for each $2 of earnings above $5,400
1986 5,760 e 480.00 e $1 for each $2 of earnings above $5,760
1987 6,000 e 500.00 e $1 for each $2 of earnings above $6,000
1988 6,120 e 510.00 e $1 for each $2 of earnings above $6,120
1989 6,480 e 540.00 e $1 for each $2 of earnings above $6,480
1990 6,840 e 570.00 e $1 for each $2 of earnings above $6,840
1991 7,080 e 590.00 e $1 for each $2 of earnings above $7,080
1992 7,440 e 620.00 e $1 for each $2 of earnings above $7,440
1993 7,680 e 640.00 e $1 for each $2 of earnings above $7,680
1994 8,040 e 670.00 e $1 for each $2 of earnings above $8,040
1995 8,160 e 680.00 e $1 for each $2 of earnings above $8,160
1996 8,280 e 690.00 e $1 for each $2 of earnings above $8,280
1997 8,640 e 720.00 e $1 for each $2 of earnings above $8,640
1998 9,120 e 760.00 e $1 for each $2 of earnings above $9,120
1999 9,600 e 800.00 e $1 for each $2 of earnings above $9,600
For beneficiaries who have reached full retirement age f
1977 1978 . . . . . . 4,000 g 333.33 g $1 for each $2 of earnings above $4,000
1979 4,500 g 375.00 g $1 for each $2 of earnings above $4,500
1980 5,000 g 416.66 g $1 for each $2 of earnings above $5,000
1981 5,500 g 458.33 g $1 for each $2 of earnings above $5,500
1982 6,000 g 500.00 g $1 for each $2 of earnings above $6,000
1981 1983 Aged 70 or older Up to age 70 . . . . . . . . .
1983 6,600 e 550.00 e $1 for each $2 of earnings above $6,600
1984 6,960 e 580.00 e $1 for each $2 of earnings above $6,960
1985 7,320 e 610.00 e $1 for each $2 of earnings above $7,320
1986 7,800 e 650.00 e $1 for each $2 of earnings above $7,800
1987 8,160 e 680.00 e $1 for each $2 of earnings above $8,160
1988 8,400 e 700.00 e $1 for each $2 of earnings above $8,400
1989 8,880 e 740.00 e $1 for each $2 of earnings above $8,880
1983 1990 . . . . . . . . . . . . $1 for each $3 of earnings above exempt amount
1990 9,360 e 780.00 e $1 for each $3 of earnings above $9,360
1991 9,720 e 810.00 e $1 for each $3 of earnings above $9,720
1992 10,200 e 850.00 e $1 for each $3 of earnings above $10,200
1993 10,560 e 880.00 e $1 for each $3 of earnings above $10,560
1994 11,160 e 930.00 e $1 for each $3 of earnings above $11,160
1995 11,280 e 940.00 e $1 for each $3 of earnings above $11,280
1996 1996 . . . . . . 12,500 1,041.67 h $1 for each $3 of earnings above $12,500
1997 13,500 1,125.00 $1 for each $3 of earnings above $13,500
1998 14,500 1,208.33 i $1 for each $3 of earnings above $14,500
1999 15,500 1,291.67 j $1 for each $3 of earnings above $15,500
2000 2000 . . . EARNINGS
TEST
ELIMINATED k		 . . . . . . . . .
For beneficiaries who will not reach full retirement age during year f
2000 2000 . . . . . . 10,080 e 840 e $1 for each $2 of earnings above $10,080
2001 10,680 e 890 e $1 for each $2 of earnings above $10,680
2002 11,280 e 940 e $1 for each $2 of earnings above $11,280
2003 11,520 e 960 $1 for each $2 of earnings above $11,520
For beneficiaries who will reach full retirement age during year f
2000 2000 . . . . . . 17,000 1,416.67 l $1 for each $3 of earnings above $17,000
2001 25,000 2,083.33 m $1 for each $3 of earnings above $25,000
2002 30,000 2,500.00 $1 for each $3 of earnings above $30,000
2003 30,720 2,560.00 $1 for each $3 of earnings above $30,720
a. Earnings of retired-worker beneficiary affect total monthly family benefit. Earnings of dependent or survivor beneficiary affect only his or her benefit. However, effective January 1985, earnings of retired-worker beneficiary do not affect benefit to divorced spouse who has been divorced at least 2 years. Effective for benefits after December 1990, the 2-year requirement is waived, if the worker was entitled to benefits before the divorce.
b. Monthly test for self-employment income is defined in terms of substantial services. For taxable years beginning after December 31, 1977, monthly test eliminated for both wage and self-employment income except that each individual may use monthly test for 1 grace year, usually the year of retirement.
c. Applied to self-employment income only.
d. Special provisions for earnings in noncovered employment outside the United States.
e. Became effective due to automatic adjustment provisions mandated by 1972 and 1973 legislation.
f. Full retirement age is 65 for beneficiaries who attain age 62 (age 60 for widow(er)s) before 2000, gradually increasing to age 67 for beneficiaries who attain age 62 in 2022 or later.
g. Discretionary increase included in 1977 legislation.
h. Actual amount is $1,041.66 2/3.
i. Actual amount is $1,208.33 1/3.
j. Actual amount is $1,291.66 2/3.
k. Public Law 106-182, enacted April 7, 2000, eliminated the earnings test beginning with the month a beneficiary reaches full retirement age (FRA). The annual earnings test that applies in the year of attainment of FRA is based on the annual limits established under P.L. 104-121 (including the $1 for $3 withholding rate). In determining annual earnings for purposes of the annual earnings test under this legislation, only earnings before the month of attainment of FRA will be considered. Public Law 106-182 did not change the annual exempt amount for beneficiaries who are under FRA throughout the year, which continues to be pegged to increases in the average wage.
l. Actual amount is $1,416.66 2/3.
m. Actual amount is $2,083.33 1/3.
SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2002; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found at the Social Security Program Rules page (http://www.socialsecurity.gov/regulations/index.htm). Social Security Administration, "Cost-of-Living Increase and Other Determinations for 2003," Federal Register, vol. 67, no. 207 (October 25, 2002).
NOTE: . . . = not applicable.
CONTACT: Joseph Bondar (410) 965-0162 or Curt Pauzenga (410) 965-7210.
Table 2.A30 Monthly earnings guidelines for substantial gainful activity, 1961–2003 (in dollars)
Year Nonblind beneficiaries a Blind beneficiaries b
Minimum Maximum
1961–1965 50 100 c
1966–June 1968 75 125 c
July 1968–1973 90 140 c
1974–1975 130 200 c
1976 150 230 c
1977 160 240 c
1978 170 260 334
1979 180 280 375
1980 190 300 417
1981 190 300 459
1982 190 300 500
1983–1989 190 300 d
1990 300 500 780
1991 300 500 810
1992 300 500 850
1993 300 500 880
1994 300 500 930
1995 300 500 940
1996 300 500 960
1997 300 500 1,000
1998 300 500 1,050
January–June 1999 300 500 1,110
July 1999 300 700 1,110
January 2000 300 700 1,170
January 2001 300 740 1,240
January 2002 300 780 1,300
January 2003 300 800 e 1,330 f
a. Earnings above the maximum amount ordinarily demonstrate SGA; earnings below the minimum amount show that SGA has not occurred. When earnings are between the minimum and maximum, other factors are considered.
b. The 1977 amendments provided that, effective 1978, earnings of blind beneficiaries would be evaluated under different SGA guidelines than nonblind beneficiaries.
c. Pre-1978 guidelines are the same as those applicable to nonblind beneficiaries.
d. Annual amounts were determined by automatic adjustments linked to increases in average wage level. The amounts equal the monthly exempt amounts under the earnings test applicable to beneficiaries who have reached full retirement age (see Table 2.A29 for the 1983–1995 amounts).
e. Computed as follows: Nonblind SGA amount for 2000, multiplied by the ratio of the 2001 national average wage index to the 1998 index. Rounding is to the nearest multiple of $10. (Had this computation produced a lower SGA level than the 2002 level, the 2002 level would have been used.)
f. Computed as follows: Blind SGA amount for 1994, multiplied by the ratio of the 2001 national average wage index to the 1992 index. Rounding is to the nearest multiple of $10. (Had this computation produced a lower SGA level than the 2002 level, the 2002 level would have been used.)
SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2002; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found at the Social Security Program Rules page (http://www.socialsecurity.gov/regulations/index.htm). Social Security Administration, "Cost-of-Living Increase and Other Determinations for 2003," Federal Register, vol. 67, no. 207 (October 25, 2002).
NOTES: Earnings are net of any wage subsidies and impairment-related expenses.
SGA guidelines for self-employed individuals differ from the guidelines for wage earners.
Self-employment activity is generally examined in terms of time spent and degree of effort, as compared with that of nondisabled self-employed individuals.
CONTACT: Curt Pauzenga (410) 965-7210 or Joseph Bondar (410) 965-0162.
Table 2.A31 Taxation of Social Security benefits
Year enacted Individuals or couples with income exceeding (dollars)— Benefits included in gross income Effective for taxable years—
Married filing jointly
1983 32,000 Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over 32,000 Ending after December 31, 1983
1993 32,000 but not 44,000 Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over 32,000 Beginning after December 31, 1993
44,000 Lesser of 85 percent of Social Security and Tier 1 Railroad Retirement benefits or the sum of 6,000 plus 85 percent of income over 44,000 Beginning after December 31, 1993
Married filing separate returns a
1983 0 Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income Ending after December 31, 1983
1993 0 Lesser of 85 percent of Social Security and Tier 1 Railroad Retirement benefits or 85 percent of income Beginning after December 31, 1993
Individuals in all other filing categories
1983 25,000 Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over 25,000 Ending after December 31, 1983
1993 25,000 but not 34,000 Lesser of one-half of Social Security and Tier 1 Railroad Retirement benefits or one-half of income over 25,000 Beginning after December 31, 1993
34,000 Lesser of 85 percent of Social Security and Tier 1 Railroad Retirement benefits or 85 percent of income over 34,000 Beginning after December 31, 1993
a. Includes only married taxpayers filing separately who lived with their spouse at any time during the tax year; married individuals filing separately who did not live with their spouse are treated the same as unmarried individuals.
SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2002; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found at the Social Security Program Rules page (http://www.socialsecurity.gov/regulations/index.htm). Taxation of Social Security benefits is governed by the Internal Revenue Service Code. IRS describes the rules governing taxation of Social Security benefits in IRS publication 915, available at http://www.irs.gov/pub/irs-pdf/p915.pdf.
NOTES: Income is defined as modified adjusted gross income, plus 50 percent of Social Security and Tier 1 Railroad Retirement benefits. Modified adjusted gross income is adjusted gross income (before Social Security or Railroad Retirement benefits are considered), plus tax-exempt interest income, with further modification of adjusted gross income in some cases involving certain tax provisions of limited applicability among the beneficiary population.
Social Security and Tier 1 Railroad Retirement benefits include workers' compensation benefits to the extent they cause a reduction in Social Security or Tier 1 Railroad Retirement disability benefits.
CONTACT: Curt Pauzenga (410) 965-7210 or Joseph Bondar (410) 965-0162.
Table 2.A32 Taxation of Social Security benefits: Examples (in dollars)
Modified adjusted gross income a Amount of benefits b One-half of benefits b Income to be compared with base amount Relevant base amount c Income in excess of base amount One-half of excess 85 percent of excess income Lower of one-half of benefits, or one-half of income between upper and lower base amounts 85 percent of benefits Taxable benefits included in gross income
If income does not exceed upper base amount—lesser of one-half of benefits or one-half of income over base amount If income exceeds upper base amount—lesser of 85 percent of benefits or one-half of income between base amounts plus 85 percent of income over upper base amount
(A) (B) (C) (D = A + C) (E) (F = D − E) (G = F ÷ 2) (H = .85 × F) (I) (J = .85 × B) (K = lesser of
C or G)		 (L = lesser of
J or I + H)
Married filing jointly
25,000 10,000 5,000 30,000 32,000 0 . . . . . . . . . . . . . . . . . .
28,000 10,000 5,000 33,000 32,000 1,000 500 . . . . . . . . . 500 . . .
33,000 10,000 5,000 38,000 32,000 6,000 3,000 . . . . . . . . . 3,000 . . .
38,000 10,000 5,000 43,000 32,000 11,000 5,500 . . . . . . . . . 5,000 . . .
40,000 10,000 5,000 45,000 44,000 1,000 . . . 850 5,000 8,500 . . . 5,850
43,000 10,000 5,000 48,000 44,000 4,000 . . . 3,400 5,000 8,500 . . . 8,400
45,000 10,000 5,000 50,000 44,000 6,000 . . . 5,100 5,000 8,500 . . . 8,500
Married filing separate returns c
0 6,000 3,000 3,000 0 3,000 . . . 2,550 0 5,100 . . . 2,550
2,000 6,000 3,000 5,000 0 5,000 . . . 4,250 0 5,100 . . . 4,250
4,000 6,000 3,000 7,000 0 7,000 . . . 5,950 0 5,100 . . . 5,100
10,000 6,000 3,000 13,000 0 13,000 . . . 11,050 0 5,100 . . . 5,100
20,000 6,000 3,000 23,000 0 23,000 . . . 19,550 0 5,100 . . . 5,100
Individuals in all other filing categories
20,000 8,000 4,000 24,000 25,000 0 . . . . . . . . . . . . . . . . . .
25,000 8,000 4,000 29,000 25,000 4,000 2,000 . . . . . . . . . 2,000 . . .
30,000 8,000 4,000 34,000 25,000 9,000 4,500 . . . . . . . . . 4,000 . . .
32,000 8,000 4,000 36,000 34,000 2,000 . . . 1,700 4,000 6,800 . . . 5,700
35,000 8,000 4,000 39,000 34,000 5,000 . . . 4,250 4,000 6,800 . . . 6,800
40,000 8,000 4,000 44,000 34,000 10,000 . . . 8,500 4,000 6,800 . . . 6,800
a. Adjusted gross income (before Social Security or Railroad Retirement benefits are considered), plus tax-exempt interest income, with further modification of adjusted gross income in some cases involving certain tax provisions of limited applicability among the beneficiary population.
b. Social Security and Tier 1 Railroad Retirement benefits, including workers' compensation benefits to the extent they cause a reduction in either of these two types of benefits.
c. For married couples filing joint returns, up to 50 percent of benefits are subject to income tax if gross income is over $32,000 but less than $44,000. If gross income is less than $32,000, none of the Social Security benefits will be taxable. If gross income exceeds $44,000, up to 85 percent of Social Security benefits will be taxable income. Similar lower and upper level thresholds or "base amounts" for single individuals are $25,000 and $34,000. There is no similar threshold or base amount for married individuals who live together but file separate returns (for example, up to 85 percent of Social Security benefits in those cases may be considered taxable income).
d. Includes only married taxpayers filing separately who lived with their spouse at any time during the tax year; married individuals filing separately who did not live with their spouse are treated the same as unmarried individuals.
SOURCES: Social Security Act of 1935 (the Act), as amended through December 31, 2002; regulations issued under the Act; and precedential case decisions (rulings). Specific laws, regulations, rulings, legislation, and a link to the Federal Register can be found at the Social Security Program Rules page (http://www.socialsecurity.gov/regulations/index.htm). Taxation of Social Security benefits is governed by the Internal Revenue Service Code. IRS describes the rules governing taxation of Social Security benefits in IRS publication 915, available at http://www.irs.gov/pub/irs-pdf/p915.pdf.
NOTE: . . . = not applicable.
CONTACT: Curt Pauzenga (410) 965-7210 or Joseph Bondar (410) 965-0162.
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