Margin Borrowing Recently Topped $1.5 Trillion. At 63, His $100,000 Trading Gain Won’t Cut His Social Security Check, but It Can Make More of It Taxable
A six-figure trading gain skips Social Security's earnings test entirely, but the IRS has a separate calculation that can quietly drag more of a retiree's monthly benefit into taxable territory before he ever sees the bill.
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Investors are borrowing a record amount of money on margin to buy stocks. Margin debt hit a record $1.5 trillion in June 2026. That is about 49% higher than a year earlier, according to data from Wall Street’s self-regulator, the Financial Industry Regulatory Authority (FINRA).
Consider a 63-year-old single man collecting $30,000 annually in Social Security who trades in a taxable brokerage account and realizes a $100,000 net gain. Before full retirement age (FRA), he expects Social Security to withhold part of his checks.
His benefits keep arriving in full. Meanwhile, the $100,000 shows up on the tax side of the ledger.
Why Social Security’s Earnings Test Skips Right Past a Trading Profit
Before FRA, Social Security’s earnings test counts only wages and net self-employment earnings, excluding dividends, capital gains, interest and other investment income. With no job or business income, his countable earnings are $0.
The 2026 earnings limit is $24,480, and Social Security withholds $1 of benefits for every $2 earned above it. If his $100,000 had been salary, the earnings-test reduction would calculate to $37,760, enough to wipe out his entire $30,000 annual benefit for the year. Because the money came from selling stock, he keeps every check.
A Second Test Adds $25,500 of His Benefits to His Taxable Income
The IRS uses combined income: half your Social Security benefits plus other income, including capital gains. For a single filer, combined income of $25,000 to $34,000 can make up to 50% of benefits taxable. Above $34,000, up to 85% can be taxed.
Without the trade, his combined income is $15,000, below the $25,000 threshold, so no Social Security is taxed.
Add the gain and combined income rises to $115,000, well past the top threshold. The maximum 85% of his benefit, or $25,500, becomes taxable income.
That $25,500 is added to his taxable income, hiking his federal tax bill on top of whatever tax he owes on the stock gain itself.
Short-Term, Long-Term and Paper Gains
A gain on stock held more than one year is long-term and taxed at lower federal rates. Short-term gains are taxed like wages. Either kind raises adjusted gross income and feeds into the federal retirement benefit test the same way.
How Margin Can Pack a Bigger Gain Into One Tax Year
Borrowing doesn’t create taxable income by itself. Taxes come due when he sells at a profit, and Social Security treats gains made with borrowed money as investment income.
Borrowing makes it easier to take bigger positions and realize larger gains in a single year. It also costs more now, with the 10-year Treasury yield above 5%. Margin interest does not simply subtract from the capital gain, although some investors may be able to deduct investment interest separately, subject to IRS limits.
When He Sells Matters More Than the Earnings Test
For a retiree holding a stock that has risen a lot, the useful questions are all about taxes:
- How much gain will he realize this year? Selling part of a position controls how much lands in combined income.
- Can losses offset it? Losses from other trades lower the net gain, reducing the federal retirement benefit test impact.
- How much of his Social Security is already taxable? If a pension or IRA withdrawals already push him past $34,000, his benefits may already be taxed at the maximum.
- Would spreading sales help or hurt? Splitting the gain into two $50,000 years means combined income reaches $65,000 in each year, and $25,500 of benefits would be taxed in both years instead of one. Spreading generally helps only when each year’s piece keeps combined income near or below the thresholds.
What to Work Out Before Selling a Big Winner
At 63, he can take a $100,000 stock gain without Social Security counting a dollar of it as money earned from work. His monthly checks stay the same.
The cost shows up at tax time, when that same gain can make as much as 85% of his benefit taxable. The best time for a rough tax estimate is before the sale, because once a sale goes through, that year’s gain is set. Filing status, state taxes and the mix of short- and long-term gains can each change the numbers. An hour with a tax professional can show what his own sale would cost.
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Gerelyn Terzo is the author of dividend investing handbook "Dividend Investing Strategies: How to Have Your Cake & Eat It Too." A veteran financial journalist, she covers agri-finance for outlets like Global AgInvesting and the broader stock market and personal finance for 24/7 Wall Street. She began at CNBC and later helped launch Fox Business in New York. Gerelyn currently resides in Woodland Park, Colorado and dabbles in nature photography as a hobby.
