Does Tax Advantage reduce my Social Security Benefits? What if I buy a house? Will I still be able to get financed? Great questions and you are very astute to think of them. Short answer is yes. 

Key Questions

• Does Tax Advantage reduce my Social Security Benefits?

• What if I buy a house? Will I still be able to get financed?

Great questions and you are very astute to think of them. Short answer is yes. Absolutely, cutting down your taxable wages will cut down on your Social Security lifetime earnings and thus your retirement benefits.

But remember that you have to pay income tax at around 30% to get that increased SSI credit in addition to SSI taxes - money that will not go to any direct personal benefit despite helping the US treasury. This alone is the definitive argument for taking tax advantage as additional income effectively triples the cost of the Social Security premium. Social Security premiums run 15.3 percent of payroll when the employer’s contribution is considered. Add that to your income tax and you are paying around 45 percent of your total compensation for your future Social Security benefit.

You have to actually run the numbers and weigh the benefits and disadvantages. Some of the questions you should ask yourself are these: