Social Security: Do non-taxable earnings count as income?

In order to qualify for Social Security retirement benefits, you are required to accumulate a set number of credits based on your income. However, not all income counts toward your Social Security record.

For example, “pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes,” says the agency that runs the program. “You may need to pay income tax, but you don’t pay Social Security taxes.”

Money you receive from work, either from an employer or clients if you are self-employed, do count as earnings and will be taxed, but the rules vary on when and how it is counted the SSA explains in ‘How Work Affects Your Benefits’. But there are also jobs that you receive income for that are neither taxed nor count toward your Social Security record, but will still be considered earnings by the SSA and count towards income limits placed on certain beneficiaries.

Non-taxable earnings and Social Security

Dr Ed Weir, a former Social Security manager, tries to resolve doubts people have about Social Security and answer their questions on his social media accounts. In one recent post he was asked “Does non-taxable income count as social security earnings?”

“A lot of people get messed up big time with that,” he responded. The example that he went into involved those who are paid by their state to take care of other people who are elderly or disabled at home. These programs save states a tremendous amount of money by keeping those who receive the care out of expensive facilities.

At the same time, it’s better for the person receiving the care to remain in their home. Additionally, the person caring for them, quite often a family member, receives money to pay their bills.

Although this money isn’t taxed by the IRS, nor by Social Security, it is still considered income, nevertheless. This is important for those caregivers who are elderly and/or disabled themselves and receiving benefits from the SSA.

For example, someone who is receiving disability benefits is allowed to work for up to nine months and still receive their full benefit known as the trial work period (TWP). In the event that they earn more than the TWP limit, $1,210 in one month in 2026, that month will count toward the 9-month limit. These months do not need to be consecutive but must all fall within a five-year period.

On the other hand, those who receive retirement benefits and have not yet reached full retirement age, if they earn more than a certain limit established each year, currently $24,480 in 2026, their benefits will be lowered by $1 for every $2 they earn above the limit. The limit significantly increases and the penalty decreases in the months leading up to a person’s full retirement age, and then no longer applies once you’ve reached full retirement age.

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