If I apply for Social Security, Will I be penalized on my Benefits before or after my deductions for ride share driver?

TAX ON SOCIAL SECURITY

Up to 85% of your Social Security benefits can be taxable on your federal tax return.  There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits.  When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable. 

 What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2021 it was  $18,960.  For 2022 it was  $19,560  —  for 2023 $21,240)  For 2024, $22,320.

After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare.  If you work as an independent contractor then you will pay self-employment tax for Social Security and Medicare.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2024 Form 1040

https://ttlc.intuit.com/questions/1899144-is-my-social-security-income-taxable

https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable

You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.

Some additional information:  There are 11 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont  These states offer varying degrees of income exemptions, but two mirror the federal tax schedule: MN and VT.

The tax laws for 2024 will change——for  tax year 2024 Missouri and Nebraska will no longer tax SS

If you are at the full retirement age or older there is no SS benefit reduction for having any type of taxable compensation.

There are three related issues.

1. For your exact question, if you are less than your full retirement age, then having income from working will reduce your benefit in the following year, if the income is more than a certain amount.  If you are at or older than your full retirement age, there is no benefit reduction even if you keep working.

However, you should also be aware of two more points.

2. If you continue to work, you will continue to pay SS and medicare tax on your earnings from work (either a W-2 job or self-employment), even though you are also collecting your benefit.

3. If your only income is your SS benefit, it is not taxable.  But if you have other income over the limit (from a job, investments, pension, gambling, or anything else) then your benefit will be taxed.