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Question for the Money Doctors

Question submitted on Aug 21, 2011.

Question

My father is currently receiving Social Security benefits. He plans to sell his food truck this year and expects to gain a profit from the sale. Will his Social Security benefits be affected from this capital gain?

Answer

There are potentially two issues to consider.  First, when someone takes social security retirement benefits prior to "full" retirement age, but also continues to work, the social security benefit may be reduced depending on how much earnings the person has.  Capital gain generally does not count as earnings so your father may not be impacted by this rule.  Also, if he is older than his full retirement age then this would not be a problem. 

Second, how much of your father's social security income that is subject to federal income tax depends on his overall income level.  And the capital gain IS included in this calculation.  So depending on how much the capital gain is and how much other income he has, the gain may cause him to pay income tax on his social security income.  These rules are pretty complicated, but you may want to look at the link below for more information on how social security is taxed:

I hope that helps.


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