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question about Earning Social Security credits & Tax Filing

I am now 45 years old, and I wanted to find out if during the last number of years I may have been missing out on getting more Social Security credits because of the way I am filing my taxes. I live in New York State, I am married, self-employed (all my jobs are either cash or via 1099), and in addition, I trade stocks for myself. My wife has a regular W-2 income and we file jointly.

So my initial question is this: If I show a $2K loss for my business (Schedule C) while a gain for my stock transactions (let's say +$40K for the year), do I still get any Social Security credit(s) on my $38K earned? Or is it then better to show some kind of a gain for my business/Schedule C, so I can receive more credits? I can always show less business deductions in order to get my Schedule C into a positive number.

I have read on the official Social Security website

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that:

"The amount of earnings it takes to earn a credit has changed since 1978. In the year 2015, you must earn $1,220 in covered earnings to get one Social Security or Medicare work credit and $4,880 to get the maximum four credits for the year"

So my final question is: Does it matter if I "earn" money via stocks trades or my self-employed business?

Thanks everyone for the help!

Reply to
quilt192
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No. You get credits on work-related income. The easiest way to tell is if is subject to FICA, it's work-related. For the tedious details, see:

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Yes. You don't pay FICA on gains from stock trades, but it doesn't count toward your SS account. Unless you're planning to die before you turn 70, you're probably better off increasing your SS credits.

Reply to
John Levine

On 2015-09-05 06:55, snipped-for-privacy@gmail.com wrote: [...]

[...]

You might be missing the big picture. SS "credits" merely establish whether you are entitled to any benefits at all. Generally a worker needs 40 credits (10 years of full time work) to be eligible for SS when they retire. More credits than that gets you zero additional benefit.

Since your spouse is earning W-2 wages, if you remain married for at least ten years (and don't in the future re-marry someone else), you may well be eligible for a spousal benefit regardless of your own credits, as long as the spouse is eligible.

You are on tenuous ground, for both tax law and financial planning, if you are deliberately understating your deductions on Schedule C. Also, if you show losses on your Schedule C for more than two years out of every five, it's highly likely you actually have a hobby rather than a business and should not be deducting any net loss at all.

What you probably should be asking is whether you are maximizing your eventual monthly benefit. That is a much more complicated topic, which takes into account your annual SS earnings (up to the limit, which is usually adjusted for inflation each year) for the highest 35 years of earnings on your record. This too includes an inflation adjustment, as wages 35 years ago obviously were lower on average than they are today.

Have you signed into your personal SSA account yet? You can get a lifetime earnings statement, a confirmation of whether you have already earned the 40 credits, as well as a projection of your future benefits.

[note: all my comments about SS benefits here are from memory, but SSA.gov web site has a wealth of info for almost any question you have].
Reply to
Mark Bole

Also,

"highly likely" is far too harsh. It is an issue, but is fact dependent.

Reply to
taxed and spent

Agreed, I should have used "possible" instead of "highly likely". Perhaps the OP can qualify as a day-trader, then the other "earnings" could be FICA-taxed as well.

Reply to
Mark Bole

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