by Carolyn Edlund
Seniors earning from art sales should manage their income with retirement benefit streams in mind. Here’s what to know.
As an artist over 65, you’ve earned your Social Security benefits and retirement income—but that doesn’t mean it’s time to stop creating. In order to maintain a balance between art income and retirement benefits, do some thoughtful planning ahead of time. That will allow you to maximize your financial security while continuing to make sales of your artwork.
Social Security benefits can be affected by earned income, depending on your situation:
If you’re at full retirement age (currently 66-67), you can earn unlimited income without reducing your Social Security benefits. In this situation, you have the green light to continue an existing business or launch into a post-career art business without fear of limiting what you can make or running into penalties. Full speed ahead!
If you’re under full retirement age, as of 2024, you could earn up to $21,240 without any penalty. Beyond that, $1 is deducted from benefits for every $2 earned. Also, keep in mind that combined income (including half of Social Security benefits) exceeding $25,000 (single) or $32,000 (married filing jointly) may make benefits partially taxable.
Are you in a situation where retirement benefits are diminished or subject to tax if you earn too much? If so, there are a number of strategies to manage and time your art sales to avoid losing retirement dollars. Here are a few ways to do this and optimize your benefits:
Schedule sales or art commission payments strategically
By tracking your earnings quarterly against existing Social Security thresholds, you can adjust your sales schedule and earnings. Maintain a spreadsheet to stay current and head off potential issues by adjusting your timing. For example, if you are approaching your allowed limit in the latter part of a year, push the completion of a project or an invoice due date until January to avoid running into a penalty. If you work with art galleries, speak with them about delaying payments for sold art if necessary.
Set up installment payments for high ticket art
Many collectors appreciate the willingness of an artist to work with them on payment plans, and this can serve you as well. You can structure payments on a commission or completed art sale, such as an initial deposit, a midpoint payment, and then final payment upon delivery, to suit your tax needs. If you have gallery representation, you may be able to discuss collector installment plans with payments distributed across tax years if that’s beneficial for you. Prepare for this arrangement by having a clear and complete contract ready to go for these circumstances. And make your life easier by using digital invoicing tools like PayPal or Square to automate installment billing and payment reminders. This will reduce your workload and bookkeeping.
Manage passive income
Many artists receive ongoing income, such as licensing or through print-on-demand sales. Both of these streams are passive, since a third party creates the product for sale. Licensing contracts often have a regular quarterly royalty payment. If you need to adjust the timing of your income, work with the licensee to arrange when you receive payment. On the other hand, print on demand sales are often inconsistent and made online through third party platforms. If you need to discontinue income to avoid penalties, simply close your shop temporarily and reopen in the new year.
Use an LLC or S-Corp structure
Setting up an LLC or S-Corporation will offer liability protection as well as income flexibility. S-Corps allow you to pay yourself a salary while taking additional income as distributions which are not subject to self-employment tax. These entities can create retirement plans like Solo 401(k)s for additional tax advantages. Sit down with your accountant to decide on a plan for optimizing your tax strategies.
Continuing an art business or even starting one while you are receiving retirement benefits is definitely possible. You don’t have to lose your earned Social Security dollars or pay additional taxes if you are clear-eyed and understand how these strategies can solve issues and save you money.
Speak Your Mind