Counting Social Security Credits
Q. I am a retiring schoolteacher who was able to buy into the Medicare program. However, I am not qualified for Social Security benefits. Upon retirement, I intend to get a part-time job to acquire the necessary 40 quarters to qualify for benefits. What is the minimum number of days I must work each quarter for that work to qualify for Social Security coverage?--P.J.G.
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A. The Social Security Administration hasn’t counted “quarters” per se since 1978, when it changed its whole method of crediting work toward Social Security coverage. Now, coverage is determined only by the amount of money you earn, not the period of time in which it was earned.
For 1996, every $640 in taxable earnings counts as one credit (formerly one quarter) toward the minimum of 40 credits required for Social Security benefits. It doesn’t matter when in the year that money was earned; the only rule is that you may earn only four credits per year. Thus, it will take at least 10 years to qualify. Thus, it will take at least 10 years to qualify if you haven’t earned any credits with part-time jobs or in work before your teaching career.
So your first $2,560 of taxable bearnings this year will give you all four credits you can earn this year. It doesn’t matter if it takes you a month, a week, a day or--in the case of sports or entertainment superstars--an hour to make the money. For 1995, each $630 in taxable earnings counted as one Social Security credit.
Tax Rate for Disability Insurance
Q. What is the tax rate for California State Disability Insurance? And what is the earnings limit on which that rate is applied? --R.L.
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A. Ready for some good news? For 1996, the first $31,767 of your earnings will be subject to a 0.8% tax rate for State Disability Insurance, giving you a maximum payment of $254 for the year. Last year, the rate was 1% on the first $31,767 of earnings for a maximum payment of $318. This year taxpayers can save as much as $64 in SDI payments. This is the second consecutive reduction in the SDI tax rate. For 1994, the rate was 1.3% on the first $31,767 in earnings, for a total possible payment of $413.
Why is this levy dropping? The state Employment Development Department says it is due to a dramatic overhaul of the program’s administration, including a new claim management system aimed at verifying claims, standardizing claims processing and rooting out fraud. In 1992, before these changes were made, the disability insurance fund reported a deficit of $54 million. State officials estimate that the fund ended 1995 with a balance of $1.5 billion.
The insurance pays benefits to workers who are disabled because of non work-related illnesses or injuries. Benefits range from $50 to $336 a week for a maximum of 52 weeks, depending on one’s earnings.
Transferring Your Property Tax Basis
Q. Which California counties participate in the state program the allows older homeowners to transfer their property tax basis upon moving? -- F.P.
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A. Ten counties now allow homeowners older than 55 to transfer their existing property tax assessed value from another county upon moving into that county. They are Alameda, Kern, Los Angeles, Marin, Modoc, Orange, San Diego, San Mateo, Santa Clara and Ventura.
Inyo, Riverside and Contra Costa counties have dropped out of the program.
The program was established in 1988 under the voter initiative known as Proposition 90.
Proposition 90 is one of two voter initiatives passed that allow older homeowners to circumvent the otherwise automatic Proposition 13 property tax reassessment that accompanies every residential sale. Under this program, the assessed value of a home is reset to its sales price, which until the recent steep downturn in California real estate value, had been rising steadily with every transaction.
Older taxpayers, many of whom supported the property-tax-cutting Proposition 13, were stunned to discover this particular long-term effect of the initiative.
Even though most were selling large family homes to move into smaller ones, rising property values meant they faced huge property taxes on the new, although smaller, home. In 1986, voters decided to allow those over age 55 to keep the assessed value of their old homes if they bought a new one of equal or lesser value in the same county.
Two years later, in another initiative, the exemption was expanded to include any county in the state that agreed to participate in the assessment-transfer program.
However, most counties have refused to do so because the program essentially restricts the amount of property tax revenue they can collect without offering any decrease in the public services they must provide for their new residents.
Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Send e-mail to carla.lazzareschi@latimes.com
