Does Rental Income Count Against Social Security?
Clarify how your rental income affects Social Security benefits. Learn the nuances to secure your financial future.
Social Security benefits provide financial support to millions of Americans, calculated primarily from an individual’s work history and earnings subject to Social Security taxes. A common question is how various income sources, particularly rental income, might affect these benefits. This article clarifies whether rental income generally counts against Social Security benefits, and how the Social Security Administration (SSA) views different income types.
Understanding Social Security Earnings Limits
The Social Security Administration (SSA) imposes an “earnings limit,” also known as the retirement earnings test, on individuals receiving benefits before their full retirement age (FRA). This limit applies only to earned income, such as wages from employment and net earnings from self-employment. Other income types, including pensions, annuities, investment dividends, interest, and most rental income, are generally not considered earned income for this test.
Exceeding this annual earnings limit can temporarily reduce Social Security benefits. For example, in 2025, if an individual is below FRA for the entire year, $1 in benefits is withheld for every $2 earned above $23,400. If a person reaches FRA during the year, a higher limit applies, with $1 withheld for every $3 earned above $62,160, but only for earnings before the month FRA is attained. Once an individual reaches their full retirement age, the earnings limit no longer applies, and they can earn any amount without benefit reduction.
General Treatment of Rental Income for Social Security
Under most circumstances, rental income does not count against Social Security benefits. The Social Security Administration (SSA) generally classifies rental income as passive income, similar to other investment earnings like dividends or interest. This means that for a typical landlord, rental income will not affect their Social Security benefit calculations or trigger the earnings test.
Social Security benefits are calculated based on earnings subject to Federal Insurance Contributions Act (FICA) taxes, which include wages and net earnings from self-employment. Since rental income is generally not subject to FICA taxes, it typically does not factor into benefit calculations or the retirement earnings test. Therefore, individuals can usually collect both Social Security benefits and rental income without a reduction, even if they are below their full retirement age.
When Rental Income May Be Counted as Earnings
While rental income is usually passive, the Social Security Administration (SSA) may consider it earned income in specific situations, potentially affecting benefits. This occurs if the property owner provides “substantial services” to tenants beyond what is typically expected for maintaining the rental property, classifying the income as net earnings from self-employment.
Substantial services are those rendered primarily for the occupant’s convenience, going beyond basic property maintenance. Examples include providing maid service, changing linens, concierge services, catering, or operating a property like a hotel or bed and breakfast. In contrast, non-substantial services, such as collecting rent, making repairs, cleaning common areas, or providing utilities, do not typically cause rental income to be considered earned income. For tax purposes, this distinction often aligns with reporting rental income on Schedule E (Supplemental Income and Loss) for passive activities versus Schedule C (Profit or Loss from Business) for self-employment income. If rental activities resemble a business with active and significant personal involvement, the income may be reclassified as earned.