Social Security retirement benefits replace earnings lost when you decide to retire, while unemployment insurance protects you if you've lost your job. If you're old enough to collect Social Security, but also ordinarily still work, you might end up receiving both benefits at the same time. This can change how your income is taxed, and in some states your unemployment benefits might be clawed back.
Important Considerations for Unemployment Beneficiaries
Unemployment benefits do not affect Social Security retirement benefits, but when you find a new job and start working again, your earnings may affect your Social Security retirement benefits if your earnings exceed a specific threshold. That limitation affects Social Security benefits received prior to full your full retirement age, 66 if you were born between 1943 and 1954, and rising by stages to 67 if you were born after 1960. Unemployment does affect Supplemental Security Income, an unrelated program also administered by the Social Security agency for persons age 65 and over, or blind or disabled. Other income — including unemployment — offsets SSI benefits.
Tax Liability Considerations
Collecting both unemployment and Social Security benefits might affect your federal taxes. Unemployment is taxable income for federal tax purposes, while Social Security is only taxable if your income from certain sources exceeds a specified threshold. The IRS adds up half of all the Social Security benefits you've received in a year, tax exempt income such as tax-exempt interest, and any other taxable income including unemployment benefits. For the 2017 tax year, the threshold for this combined income is $32,000 for a married couple filing jointly, or $25,000 if you're filing as head of household, single or if you're widowed or legally separated. The threshold is zero dollars for married couples who do not qualify as individuals but are filing separately. Collecting unemployment benefits might raise you above that level, making your Social Security benefits taxable even if they previously weren't.
Retirement Income and Unemployment Benefits
Most states deduct some or all retirement-pension income from unemployment benefits. However, individual states exclude Social Security retirement benefits from pension income. For example, Arizona and California do not include Social Security as countable income for unemployment offset purposes, but do use other retirement pensions to reduce their unemployment. Texas excludes Social Security from pension income, although any other income from employers — including retirement benefits, annuities and pensions — reduce Texas' unemployment. The states of New York and Oregon ignore Social Security benefits when paying out unemployment. Both, however, count other retirement pensions against unemployment.
Social Security Offset by Unemployment
Recipients cannot assume their state ignores Social Security retirement when calculating unemployment benefits. For example, Utah states that any retirement income — including disability benefits — may reduce the unemployment payable. Florida offsets unemployment by Social Security retirement benefits received on a number other than the worker's, such as benefits as a spouse or widow. The state of Illinois deducts up to half of Social Security retirement benefits received from its unemployment benefits.
- Texas Workforce Commission: Unemployment Insurance Benefits Handbook
- California Employment Development: Partial Unemployment Rules
- U.S. Social Security Administration: Will Unemployment Benefits Affect my Social Security Benefits?
- U.S. Social Security Administration: Full Retirement Age
- U.S. Internal Revenue Service: Are Social Security Benefits Taxable?
- Service Locator: Link to U.S. State Unemployment Services
- Social Security: Understanding Supplemental Security Income
- Social Security: Retirement Benefits