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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.
Need help creating a retirement income plan that includes your Social Security benefits and other assets? Connect with a financial advisor today.
What Is the Social Security Earnings Test?
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 2026, the limit is $24,480, 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 $65,160, 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.)
The Benefit Reduction Isn’t Permanent
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.)
Social Security Taxation
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 income below $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.)
Social Security may cover part of your expenses, but what about the rest? Run your numbers through SmartAsset’s retirement calculator to see how your savings could fill the gap.
Retirement Calculator
Calculate whether or not you’re on track to meet your retirement savings goals.
About This Calculator
To estimate how much you may need to save for retirement, we begin by calculating how much you're expected to spend over the course of your retirement. This includes estimating the income you'll need based on your lifestyle preferences, then factoring in how many years you may spend in retirement. We assume a lifespan of 95 by default, though you can adjust it after your calculation is complete.
Once we have a clearer view of your total retirement needs, we use our models to evaluate your existing and future resources. This includes estimating retirement income from Social Security and the impact of current retirement plans, pensions and other accounts. For additional inputs and a comprehensive retirement plan, please see our full Retirement Calculator.
Assumptions
Lifespan: We assume you will live to 95. We stop the analysis there, regardless of your spouse's age.
Retirement accounts: We automatically distribute your future savings optimally among different retirement accounts. We assume that the IRS contribution limits for your retirement accounts increase with inflation.
Social Security: We estimate your Social Security income using your stated annual income and assuming you have worked and paid Social Security taxes for 35 years prior to retirement. Our estimate is sensitive to penalties for early retirement and credits for delaying claiming Social Security benefits.
Return on savings: We assume the percentage return on your savings differs by whether you're pre- or post-retirement and by account type, with a distinction between investment accounts and savings accounts. This assumption does not account for market volatility or investment losses and assumes positive growth over time. All investing involves risk, including the possible loss of principal.
SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions, and tools are for general information only and are not intended to provide specific advice or recommendations for any individual. The retirement calculator is meant to demonstrate different potential scenarios to consider, and is not intended to provide definitive answers to anyone's financial situation. We always suggest that you consult your accountant, tax, legal or financial advisor concerning your individual situation.
This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.
Bottom Line
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.
Social Security Planning Tips
- 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 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.
- Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.
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.
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