20 CFR 404.430 – Monthly and annual exempt amounts defined; excess earnings defined
(a) Monthly and annual exempt amounts. (1) The earnings test monthly and annual exempt amounts are the amounts of wages and self-employment income which you, as a Social Security beneficiary, may earn in any month or year without part or all of your monthly benefit being deducted because of excess earnings. The monthly exempt amount, (which is
Terms Used In 20 CFR 404.430
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- earnings: as used in this subpart (other than as a part of the phrase "net earnings from self-employment") includes the sum of your wages for services rendered in a taxable year, plus your net earnings from self-employment for the taxable year, minus any net loss from self-employment for the same taxable year. See 20 CFR 404.429
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
(2) We determine the monthly exempt amounts for each year by a method that depends on the type of exempt amount. In each case, the exempt amount so determined must be greater than or equal to the corresponding exempt amount in effect for months in the taxable year in which the exempt amount determination is being made.
(i) To calculate the lower exempt amount (the one applicable before the calendar year of attaining full retirement age) for any year after 1994, we multiply $670 (the lower exempt amount for 1994) by the ratio of the national average wage index for the second prior year to that index for 1992. If the amount so calculated is not a multiple of $10, we round it to the nearest multiple of $10 (i.e., if the amount ends in $5 or more, we round up, otherwise we round down). The annual exempt amount is then 12 times the rounded monthly exempt amount.
(ii) The higher exempt amount (the one applicable in months of the year of attaining full retirement age (as defined in section 404.409(a)) that precede such attainment) was set by legislation (Public Law 104-121) for years 1996-2002. To calculate the higher exempt amount for any year after 2002, we multiply $2,500 (the higher exempt amount for 2002) by the ratio of the national average wage index for the second prior year to that index for 2000. We round the result as described in paragraph (a)(2)(i) of this section for the lower exempt amount.
(iii) The following are the annual and monthly exempt amounts for taxable years 2000 through 2005.
| Year | For years through taxable year preceding year of reaching full retirement age | Months of taxable year prior to month of full of retirement age | ||
|---|---|---|---|---|
| Reduction: $1 for every $2 over the exempt amount | Reduction: $1 for every $3 over the exempt amount | |||
| Annual | Monthly | Annual | Monthly | |
| 2000 | $10,080 | $840 | $17,000 | $1,417 |
| 2001 | 10,680 | 890 | 25,000 | 2,084 |
| 2002 | 11,280 | 940 | 30,000 | 2,500 |
| 2003 | 11,520 | 960 | 30,720 | 2,560 |
| 2004 | 11,640 | 970 | 31,080 | 2,590 |
| 2005 | 12,000 | 1,000 | 31,800 | 2,650 |
(b) Method of determining excess earnings for years after December 1999. If you have not yet reached your year of full retirement age, your excess earnings for a taxable year are 50 percent of your earnings (as described in § 404.429) that are above the exempt amount. After December 31, 1999, in the taxable year in which you will reach full retirement age (as defined in § 404.409(a)), the annual (and monthly, if applicable) earnings limit applies to the earnings of the months prior to the month in which you reach full retirement age. Excess earnings are 33