“I suggested renting the property to a local relative for $1000 a month, which would just cover the cost of $12,000 RE taxes and make no profit.Would this still affect their SS benefits and pension?”-----> The SSA regularly adjusts the amount that a person receiving SS benefits.If they file a joint return,they will have to pay taxes if they have a total income(provisional) of more than $32,000. In general, pensions count as income, also IRA or 401K withdrawals and any investment income that they have ,i.e., capital gains, interest, dividends. Basically, anything that counted as income before they retired that they are still getting, counts as income after they retire. Depending on their total income, their social security might be partially taxable or not. However, yourparents’ pension(as long as their pension plan it is funded by their former ER(s) and they only collect after they have worked for the company )is from work where they paid Social Security taxes, it will not affect the amount of their Social Security benefits. A pension based on work that is not covered by Social Security (for example, Federal civil service and some State or local government agencies) may cause the amount of their Social Security benefit to be reduced.For example, your parents must file Sch E of 1040 to report their rental income, $12,000 and expenses of renting the SHE property can be deducted from their gross rental income. They generally deduct their rental expenses in the year they pay them. So, UNLESS the provisional income of your parents is MORE than $32,000, they are NOT subject to tax on their Soc Sec benefits. Assume that their net rental income (I mean rental income- expenses on Sch E )is $4,000 and their taxable private pension income is $5,000, then their AGI is $9,000;$4,000+$5,000 and their provisional income is $20,000;$9,000+50% of their Soc Sec benefit, $11,000( I assume it is $22,000). Then their provisional income is LESS than $32,000, they are NOT subject to tax on their Soc Sec benefits.So, it depends on their provisional income.
Please visit the SSA Website: Contact Social Security By Phone Benefits Planner: Taxes and your Social Security benefits
“What are the tax implications?”--->As described above; it depends on their provisional income.