Question

Determine the taxable amount of Social Security benefits for the following situations. If required, round your answers to the nearest dollar. If an amount is zero, enter "0". a. Erwin and Eleanor are married and file a joint tax return. They have adjusted gross income of $39,200, no tax-exempt interest, and $13,720 of Social Security benefits. As a result, $ of the Social Security benefits are taxable. b. Assume Erwin and Eleanor have adjusted gross income of $15,000, no tax-exempt interest, and $16,500 of Social Security benefits. As a result, $ 0 of the Social Security benefits are taxable. c. Assume Erwin and Eleanor have adjusted gross income of $95,500, no tax-exempt interest, and $14,325 of Social Security benefits. As a result, $ of the Social Security benefits are taxable.

Answer 1

For income below $32,000                           Not taxable

For income between $32,000 to 44,000 50 % of benefits are taxable

More than $44,000                                       85% of benefits are taxable

Answer(a)

(i)Adjusted gross income              39,200

(ii)Social security benefits            6,860

(50% of 13,720 )

(iii)Tax exempt interest                     0

Combined income(i+ii+iii)=          46,060

As the combined income is over 44,000, total taxable social security benefit will be

=85% of 6,860

=5,831

Answer(b)

(i)Adjusted gross income              15,000

(ii)Social security benefits            8,250

(50% of 16,500 )

(iii)Tax exempt interest                     0

Combined income(i+ii+iii)=          23,250

As the combined income is over 23,250 (i.e below 32,000) , total social security benefits taxable will be zero

Answer(c)

(i)Adjusted gross income              95,500

(ii)Social security benefits            7,162.50

(50% of 14,325 )

(iii)Tax exempt interest                     0

Combined income(i+ii+iii)=          102,662.50

As the combined income is over 44,000, total taxable social security benefit will be

=85% of 14,325

=12,176.25