What are the tax implications of working in retirement?

@daniela 

Working in retirement can have several tax implications. Here are some key points to consider:

1. Social Security benefits: If you are receiving Social Security benefits and continue working, your benefits may be subject to taxation. The amount of benefits subject to tax depends on your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits). If the combined income exceeds a certain threshold, a portion of your benefits may become taxable.
2. Income tax: Any additional income earned from working in retirement will be subject to income tax. The tax rate will depend on your total taxable income, including wages, self-employment income, pensions, and distributions from retirement accounts.
3. Medicare premiums: If you are enrolled in Medicare, your Part B and Part D premiums are based on your income. Higher income individuals may have to pay higher premiums. Additional income earned from working in retirement can push you into a higher income tier, leading to increased Medicare premiums.
4. Required Minimum Distributions (RMDs): Once you reach the age of 72 (previously 70½), you are required to take distributions from most retirement accounts, such as traditional IRAs and 401(k)s. These distributions are subject to income tax. However, if you are still working and your employer offers a 401(k) plan, you may be allowed to delay RMDs until you retire.
5. Deductible expenses: Working in retirement may also allow you to deduct certain work-related expenses, such as home office expenses, professional dues, and business-related travel costs. However, these deductions have to meet specific criteria set by the Internal Revenue Service (IRS).

It's important to consult a tax professional or use tax software to accurately determine the tax implications of working in retirement based on your individual circumstances.