No, dividends do not count as earnings for Social Security purposes. While they are generally considered income for federal income tax purposes, they are specifically excluded when determining your Social Security earnings record or for calculating Social Security taxes.
Understanding Social Security Earnings
Social Security benefits are primarily based on your "covered earnings" throughout your working life. These earnings are typically wages from employment or net earnings from self-employment on which you pay Social Security taxes (FICA taxes). Certain types of income, including dividends, do not fall into this category.
What Doesn't Count as Social Security Earnings?
The Social Security Administration distinguishes between taxable income and income that contributes to your Social Security record. Income from savings and investments, such as dividends and interest, does not count as earnings for Social Security. This also applies to other forms of retirement income.
Here's a breakdown of common income types and their status regarding Social Security:
- Pension payments: Do not count as Social Security earnings.
- Annuities: Do not count as Social Security earnings.
- Interest from savings and investments: Does not count as Social Security earnings.
- Dividends from savings and investments: Do not count as Social Security earnings.
Important Note: While these types of income do not affect your Social Security earnings record, they may still be subject to federal and state income taxes. The key distinction is between income tax liability and Social Security tax liability.
Income Types and Social Security Impact
To clarify the difference, consider the following table:
| Income Type | Counts as Social Security Earnings? | Subject to Social Security Taxes? | Subject to Income Tax? |
|---|---|---|---|
| Wages from Employment | Yes | Yes | Yes |
| Net Earnings from Self-Employment | Yes | Yes | Yes |
| Dividends | No | No | Yes (generally) |
| Interest | No | No | Yes (generally) |
| Pension Payments | No | No | Yes (generally) |
| Annuities | No | No | Yes (generally) |
This table illustrates that income like dividends, interest, pensions, and annuities are distinct from wages and self-employment income when it comes to Social Security. They are not used to determine your eligibility for benefits, the amount of your benefits, or for calculating your Social Security tax obligations.
For more detailed information on what income is included in your Social Security record, you can refer to resources from the Social Security Administration, such as their guide on Annuities and Social Security.
