Question

Amir, who is single, retired from his job this year. He received a salary of $23,000 for the portion of the year that he worked, tax-exempt interest of $3,000, and dividends from domestic corporations of $3,900. On October 1, he began receiving monthly pension payments of $1,600 and Social Security payments of $500. Assume an exclusion ratio of 40% for the pension. Amir owns a duplex that he rents to others. He received rent of $10,000 and incurred $15,000 of expenses related to the duplex. He continued to actively manage the property after he retired from his job. Requirement Compute Amir's adjusted gross income. 23000 3900 Salary Dividend income Pension income (taxable portion) Social security income (taxable portion) Rental income 10000 Gross income Minus: Deductions for Adjusted gross income Rental expenses 15000 Adjusted gross income

Answer 1

0%-85% of Social security benefits are taxable based on levels of Provisional income (AGI before social security + tax exempt income + Half of social security benfits). Here, the provisional income will be

Salary + Dividend Income + Pension(Full as tax exempt portion is also included) + Rental Income + Half of Social security benefits i.e. 23,000+3,900+ 1,600+ 10,000+ 250( half of 500) = $37,150

Since, he is an Individual and his provisional income is greater than $34,000, his social security benefits are taxable upto 85%

Salary	23,000
Dividend Income	3,900
Pension Income (Taxable Portion)	960
Social Security Income (Taxable Portion)	425
Rental Income	10,000
Gross Income	38,285
Minus: Deductions for Adjusted Gross Income
Rental Expenses	15,000
Adjusted Gross Income	23,285

The taxable portion of Social security benefits = 425 (85% of 500)

Taxable portion ofPension income = 960(60% of 1,600)