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Does the interest, dividends and capital gains from assets owned in my taxable brokerage account count toward the Social Security earnings limit?
Only wages from employment or self-employment count toward the exempt earnings limit for those who file for early Social Security. Investment income won’t result in benefit withholdings, but it can influence the taxation of your benefits and other aspects of your retirement income strategy. Here are some things to know about how Social Security interacts with other income sources.
If you claim Social Security before full retirement age (FRA) and continue working, your benefits may be temporarily reduced if your earned income exceeds certain limits. In 2025, the limit is $23,400, and $1 is withheld for every $2 earned above this threshold. For example, earning $33,400 would result in $5,000 being withheld.
In the year you reach FRA, the earnings limit increases to $62,160, and the withholding rate decreases to $1 for every $3 earned above the limit. (And if you need help determining how your wages may impact your Social Security, match with a financial advisor and talk it over with them.)
Luckily, the benefit reduction for exceeding the exempt earnings limit is not permanent. If you stop receiving that income, the Social Security Administration (SSA) will stop withholding a portion of your benefits.
Additionally, the withheld benefits are not lost. Once you reach FRA, Social Security recalculates your benefit to credit the months when payments were reduced. For example, if $5,000 is withheld and your monthly benefit is $2,500, you’ll be credited for two months of benefits at FRA.
While you can recoup those withholdings, it’s important to remember that claiming Social Security before reaching FRA will permanently reduce your lifetime benefits by as much as 30%. This money cannot be recouped. (And if you need additional help navigating the rules of Social Security, consider speaking with a financial advisor who specializes in retirement planning.)
While the interest, dividends and capital gains generated by your brokerage account will not count against your exempt earnings cap, they can impact how much of your Social Security benefits are subject to income tax.
Investment income, such as interest, dividends and capital gains, can affect the taxation of your Social Security benefits. Taxability depends on your “combined income,” which includes your adjusted gross income (AGI), half of your Social Security benefits, and any tax-exempt interest.
For singles:
Combined income below $25,000: Benefits are tax-free.
Combined income between $25,000 and $34,000: Up to 50% of benefits may be taxable.
Combined income above $34,000: Up to 85% of benefits may be taxable.
For married couples filing jointly:
Combined incomebelow $32,000: Benefits are tax-free.
Combined income between $32,000 and $44,000: Up to 50% may be taxable.
Combined income above $44,000: Up to 85% may be taxable
Interest, dividends and capital gains are all components of your AGI so they will impact how much of your benefits are subject to income tax. (And remember, if you need additional help planning for taxes in retirement, work with a financial advisor with retirement planning and/or tax expertise.)
Passive income you receive from investments does not count toward your exempt earnings limit for Social Security – only the income you earn from working does. However, investment income does increase your AGI, which is one of the components considered in determining the taxable portion of your Social Security benefit.
If you’re married, divorced or widowed, you may qualify for additional benefits. Spousal benefits can provide up to 50% of your partner’s FRA benefit, while survivor benefits may allow you to receive a deceased spouse’s benefit. Understanding how these benefits integrate with your own can help ensure you’re not leaving money on the table.
Work with a financial advisor who can help you plan for Social Security and create a tax-efficient retirement income plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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Brandon Renfro, CFP®, is a SmartAsset financial planning columnist and answers reader questions on personal finance and tax topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.
Please note that Brandon is not an employee of SmartAsset and is not a participant in SmartAsset AMP. He has been compensated for this article.Some reader-submitted questions are edited for clarity or brevity.
