RS 02501.025 Determining Annual and Monthly Exempt Amounts

A. Background

The earnings test (ET) exempt amounts are the amounts established each year that are used to determine deductions under the ET. These amounts vary from year to year and are based on the increases in the level of nationwide earnings unless otherwise increased by legislation. New exempt amounts for the upcoming year are published in October of each year.

B. Policy

1. Annual Exempt Amount

The annual exempt amount is used to determine deductions under the ET. There are separate amounts established for beneficiaries under full retirement age (FRA) and for those who are in the year of attaining FRA. The amount earned by a beneficiary is compared to the applicable annual exempt amount to determine deductions under the ET. (For the year attaining FRA, see RS 02501.080 B.2.)

2. Monthly Exempt Amount

In the year(s) the monthly earnings test applies, the monthly exempt amount is compared to monthly earnings to determine whether full benefits can be paid for any month of that year. The monthly exempt amount is equal to 1/12 of the applicable annual exempt amount. (See RS 02501.030 for years in which the monthly test applies.)

3. Exempt Amount in Taxable Year (TY) of Death

a.

The full annual exempt amount is used in the TY of death effective with deaths occurring after 11/10/88. Before that date, the exempt amount was determined by multiplying the monthly exempt amount by the number of months up to and including the month of death. The year of death was referred to as the short taxable year. (See RS 02501.025C.3.a.)
b.

Effective with deaths occurring after 11/10/88, use the full annual exempt amount for a beneficiary who dies in the year of attainment of FRA even if they died before attaining FRA.

C. Procedure

1. Determining the Appropriate Exempt Amount

Use the following steps to determine the appropriate annual and monthly exempt amounts:

a.

Determine the beneficiary's age for the year in which the beneficiary has estimated/reported earnings. If the beneficiary has estimated/reported earnings over several years, determine the age for each year.
b.

Find the applicable exempt amount that corresponds to the age of the beneficiary for the year in question on the chart in RS 02501.025D.
c.

Compare the exempt amount with the earnings for the TY. If the earnings for the TY are equal to or less than the exempt amount, no work deductions apply.

2. Fiscal Year Cases

Use the test that corresponds with the end of the fiscal year.

EXAMPLE: A beneficiary's TY ends 10/99 and the beneficiary is over age 65. Therefore, the exempt amount is $15,500 and the monthly exempt amount is $1292, if applicable.

3. Short TY

a.

A short taxable year is a TY that ends before 12 months have elapsed. A short taxable year occurs when there is a change from one taxable year to another, usually from a calendar to a fiscal year or from one fiscal year to another. (See RS 02501.025B.3. for short taxable year due to deaths that occurred on or before 11/10/88.)
b.

Compute the exempt amount for a short TY by multiplying the monthly exempt amount by the number of months in the short TY.

EXAMPLE: The IRS approves reporting based on a FY basis for a beneficiary that begins 7/1/99 and ends 6/30/00. TY for 1999 is a short TY. The short TY begins 1/99 and ends 6/99. The beneficiary, who is 63, earned $16,000 for the short TY. The exempt amount for the short TY is $4,800 ($800 x 6).

D. Exhibit

The chart below reflects the earnings limitations and deduction rules beginning with 1984.

Effective
for Tax-		Under Age 65		Age 65-69
able Year		Exempt Amount		Exempt Amount		Deduction Rate
Ending	Taxable					Deduct $1 in
After–	Year*	Annual	Monthly	Annual	Monthly	benefits for every–
12/31/83	1984	$5,160	$430			$2 over $5,160
				$6,960	$580	$2 over $6,960
12/31/84	1985	$5,400	$450			$2 over $5,400
				$7,320	$610	$2 over $7,320
12/31/85	1986	$5,760	$480			$2 over $5,760
				$7,800	$650	$2 over $7,800
12/31/86	1987	$6,000	$500			$2 over $6,000
				$8,160	$680	$2 over $8,160
12/31/87	1988	$6,120	$510			$2 over $6,120
				$8,400	$700	$2 over $8,400
12/31/88	1989	$6,480	$540			$2 over $6,480
				$8,880	$740	$2 over $8,880
12/31/89	1990	$6,840	$570			$2 over $6,840
				$9,360	$780	$3 over $9,360
12/31/90	1991	$7,080	$590			$2 over $7,080
				$9,720	$810	$3 over $9,720
12/31/91	1992	$7,440	$620			$2 over $7,440
				$10,200	$850	$3 over $10,200
12/31/92	1993	$7,680	$640			$2 over $7,680
				$10,560	$880	$3 over $10,560
12/31/93	1994	$8,040	$670			$2 over $8,040
				$11,160	$930	$3 over $11,160

WHEREVER THE TAXABLE YEAR DATES OVERLAP, AS IN A FISCAL YEAR, USE THE HIGHER AMOUNT.

*12 month calendar year or fiscal year.

Effective
for Tax-		Under Age 65		Age 65-69
able Year		Exempt Amount		Exempt Amount		Deduction Rate
Ending	Taxable					Deduct $1 in
After–	Year*	Annual	Monthly	Annual	Monthly	benefits for every–
12/31/94	1995	$8,160	$680			$2 over $8,160
				$11,280	$940	$3 over $11,280
12/31/95	1996	$8,280	$690			$2 over $8,280
				$12,500	$1,042	$3 over $12,500
12/31/96	1997	$8,640	$720			$2 over $8,640
				$13,500	$1,125	$3 over $13,500
12/31/97	1998	$9,120	$760			$2 over $9,120
				$14,500	$1,209	$3 over $14,500
12/31/98	1999	$9,600	$800			$2 over $9,600
				$15,500	$1,292	$3 over $15,500

Effective
for Tax-		Prior to Year of FRA		Year of FRA
able Year		Exempt Amount		Exempt Amount		Deduction Rate
Ending	Taxable					Deduct $1 in
After–	Year*	Annual	Monthly	Annual	Monthly	benefits for every–
12/31/99	2000	$10,080	$840			$2 over $10,080
				$17,000	$1,417	$3 over $17,000
12/31/00	2001	$10,680	$890			$2 over $10,680
				$25,000	$2,084	$3 over $25,000
12/31/01	2002	$11,280	$940			$2 over $11,280
				$30,000	$2,500	$3 over $30,000
12/31/02	2003	$11,520	$960			$2 over $11,520
12/31/02				$30,720	$2,560	$3 over $30,720
12/31/03	2004	$11,640	$970			$2 over $11,640
12/31/03				$31,080	$2,590	$3 over $31,080
12/31/04	2005	$12,000	$1,000			$2 over $12,000
12/31/04				$31,800	$2,650	$3 over $31,800
12/31/05	2006	$12,480	$1,040			$2 over $12,480
12/31/05				$33,240	$2,770	$3 over $33,240
12/31/06	2007	$12,960	$1,080			$2 over $12,960
12/31/06				$34,440	$2,870	$3 over $34,440
12/31/07	2008	$13,560	$1,130			$2 over $13,560
				$36,120	$3,010	$3 over $36,120
12/31/08	2009	$14,160	$1,180			$2 over $14,160
				$37,680	$3,140	$3 over $37,680
12/31/09	2010	$14,160	$1,180			$2 over $14,160
12/31/09				$37,680	$3,140	$3 over $37,680
12/31/10	2011	$14,160	$1,180			$2 over $14,160
12/31/10				$37,680	$3,140	$3 over $37,680
12/31/11	2012	$14,640	$1,220			$2 over $14,640
12/31/11				$38,880	$3,240	$3 over $38,880
12/31/12	2013	$15,120	$1,260			$2 over $15,120
12/31/12				$40,080	$3,340	$3 over $40,080
12/31/13	2014	$15,480	$1,290			$2 over $15,480
12/31/13				$41,400	$3,450	$3 over $41,400
12/31/14	2015	$15,720	$1,310			$2 over $15,720
				$41,880	$3,490	$3 over $41,880
12/31/15	2016	$15,720	$1,310			$2 over $15,720
				$41,880	$3,490	$3 over $41,880
12/31/16	2017	$16,920	$1,410			$2 over $16,920
				$44,880	$3,740	$3 over $44,880
12/31/17	2018	$17,040	$1,420			$2 over $17,040
				$45,360	$3,780	$3 over $45,360
12/31/18	2019	$17,640	$1,470			$2 over $17,640
				$46,920	$3,910	$3 over $46,920
12/31/19	2020	$18,240	$1,520			$2 over $18,240
				$48,600	$4,050	$3 over $48,600
12/31/20	2021	$18,960	$1,580			$2 over $18,960
				$50,520	$4,210	$3 over $50,520
12/31/21	2022	$19,560	$1,630			$2 over $19,560
				$51,960	$4,330	$3 over $51,960
12/31/22	2023	$21,240	$1,770			$2 over $21,240
				$56,520	$4,710	$3 over $56,520
12/31/23	2024	$22,320	$1,860			$2 over $22,320
				$59,520	$4,960	$3 over $59,520
12/31/24	2025	$23,400	$1,950			$2 over $23,400
				$62,160	$5,180	$3 over $62,160