Will a tax refund in 2025 trigger Social Security earnings limit clawback if we claim early?
My husband (63) and I (62) are both retiring in late January 2025 and planning to start our Social Security retirement benefits in February (payments starting March). We're still under our Full Retirement Age, so I know we're subject to the earnings test ($22,680 annually for 2025, I think?). Here's what's confusing me - we expect to get a sizeable tax refund in April 2025 for our 2024 taxes when we were both still working full-time. Would SSA consider that tax refund as income for 2025 earnings test purposes? Could they demand repayment of benefits if the refund pushes us over the limit? Our tax refund might be around $5,700. We've worked really hard to plan this retirement timing, and I don't want to mess up our benefit payments right at the start. Has anyone dealt with this specific situation before?
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GalaxyGlider
Don't worry about the tax refund! The IRS refund is NOT counted as earned income for Social Security earnings test purposes. The SSA only counts actual wages and self-employment income toward the annual earnings limit. A tax refund is simply money the government already took from you and is giving back - it's not new earnings. I went through this exact scenario last year. What DOES count is any actual work income you receive in 2025. So if you're still getting paychecks in January 2025 before retiring, those wages will count toward your annual limit. Also make sure you don't have any vacation/sick pay that might be paid out after you retire - that counts in the month received.
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Emma Davis
•Oh thank goodness - that's a huge relief! We'll definitely have January wages that count, but we've calculated those into our annual limit already. I was stressing about the refund pushing us over. Thanks so much for sharing your experience!
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Malik Robinson
tax refunds dont count as earning!!! my sister went thru this n the ssa told her only W2 or 1099 stuff counts for earnings test. think about it - its just $ they took 2 much of anyways
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Isabella Silva
•While the overall point here is correct (tax refunds don't count as earnings), I want to clarify something important: The earnings test looks at when you RECEIVE the money, not when you earn it. So any work income received in 2025 - even if earned in 2024 - will count toward the 2025 earnings limit. This includes delayed commissions, bonuses, or agricultural payments. To the original poster - if you're both stopping work in January 2025, just make sure you've counted ALL income you'll receive after retirement - including any vacation payouts, sick leave, performance bonuses, etc.
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Ravi Choudhury
You guys better be VERY careful with the January 2025 earnings! If either of you goes over the MONTHLY limit for January ($1,890 for 2025), you won't get benefits for that month!!! SSA uses a monthly test in your first year of retirement. After that first year, they switch to the annual limit. I learned this the HARD WAY and had to pay back benefits because nobody told me about this rule!!!
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Emma Davis
•Wait what? There's a MONTHLY limit too? I thought it was just annual! We're both finishing up the month of January with our employers, so we'll definitely exceed $1,890 each for that month. Does this mean we shouldn't apply for benefits until March instead of February?
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Isabella Silva
The previous comment is pointing out something important but needs clarification. Yes, there is a special rule for the first year you retire. In your first year claiming benefits, Social Security allows you to receive full benefits for any month you earn below the monthly limit ($1,890 in 2025) regardless of your annual total. Since you're both working in January 2025 and earning over the monthly limit, you wouldn't receive benefits for January. You have two options: 1. Start your benefits in February as planned, but understand you won't receive February's payment (which comes in March) if either of you earns over $1,890 in February. 2. Wait and start benefits with March's entitlement (April payment) to be safe, assuming you're fully retired in March. This is called the "grace year" rule, and it's designed to help people who retire mid-year.
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Freya Andersen
•Great explanation of the grace year rule! I'd also suggest the couple consider whether claiming at 62/63 is the best financial move anyway. Each year they wait until FRA increases their benefit by approximately 8%. If they have sufficient savings, sometimes it makes more sense to delay benefits and avoid these earnings test complications entirely.
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Omar Farouk
Has anyone tried calling the SSA to get a straight answer about this? I spent 3 hours on hold last month trying to get a simple answer about my retirement benefits and never got through to anyone. The offices near me have 2-month waits for appointments. The system is completely broken!
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CosmicCadet
•I had the same problem last year - impossible to get through! Then my neighbor told me about this service called Claimyr that gets you through to a real SSA agent without the wait. I was skeptical but tried it - had an agent on the phone in under 5 minutes! They have a video showing how it works at https://youtu.be/Z-BRbJw3puU. It was seriously worth it to get my retirement application questions answered right away instead of waiting weeks for an appointment.
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GalaxyGlider
@OP - while we've addressed your main question about tax refunds (they don't count as earnings), I think it's important to mention that there are some occasional quirks with the earnings test. For instance, if you receive back pay, vacation pay, severance, or certain performance bonuses in 2025 for work done in 2024, those DO count toward the 2025 limit when received. Also, if either of you might do any consulting or part-time work later in 2025, remember that self-employment income counts too. The SSA generally counts net earnings from self-employment.
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Emma Davis
•Thanks for this additional info. My husband might do some occasional consulting later in the year, so we'll have to track that carefully. Is there any way to report estimated earnings to SSA ahead of time? I'd rather them withhold the right amount upfront than have to pay anything back later.
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Isabella Silva
Yes, you can and should report your estimated earnings to Social Security when you apply for benefits. They will ask for this information during the application process. If your earnings change later in the year, you can update your estimate by calling SSA or visiting an office. Regarding your husband's potential consulting work - remember that for self-employment, SSA counts net earnings (after business expenses) and when the income is received, not when the work was performed. So if he does work in December but doesn't get paid until January 2026, that counts toward 2026's earnings test, not 2025. Based on everything discussed here, it sounds like your best approach is to: 1. Delay applying until March entitlement/April payment to avoid the January/February monthly earnings test issues 2. Report estimated earnings when you apply 3. Track any consulting income carefully 4. Remember your tax refund won't affect benefits at all
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Emma Davis
•This is incredibly helpful - thank you! We're going to follow your advice exactly and push our application back a couple months. Better safe than sorry with the monthly limit rule. Really appreciate everyone's help in figuring this out!
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Malik Robinson
my cousin had to deal with an overpayment last year and SS was a NIGHTMARE about it. took like 5 months to fix!! def better to just wait til ur totally done working b4 applying
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