Question

George and Weezy received $29,100 of Social Security benefits this year ($11,000 for George: $18,100 for Weezy). They also received $4,800 of Interest from jointly owned City of Ranburne Bonds and dividend Income. What amount of the Social Security benefits must George and Weezy Include in their gross Income under the following Independent situations? (Do not round Intermediate calculations. Round your final answers to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Required

1. George and Weezy file married separate and receive $8,750 of dividend income from stocks owned by George Amount to be included George and Weezy?

Amount for George is________, Amount for Weezy is_________.

2. George and Weezy file married joint and receive $32,200 of dividend income from stocks owned by George. Amount to be included as taxable income?

3. George and Weezy file married joint and receive $16,100 of dividend income from stocks owned by George. Amount to be included as taxable income?

Answer 1

(1)

If the married taxpayers are filing separate returns then,Taxable income is lower of

(a)    85% × Social Security benefits

                                 or

              (b) 85% of { Modified AGI + (50% × Social Security benefits)}

Lower of                                                       

85%*11000 $   9,350

85%*(8750 + 4800*50% + 50%*11000) $ 14,153

Amount to be included for George $   9,350

                                                                       

Lower of                                                       

85%*18100                                                   $ 15,385

85%*(4800*50% + 50%*18100)               $ 9,733

Amount to be included for Weezy         $ 9,733

(2)

Since a married joint return has been filed, base amount is 32,000 $ and upper limit is 44,000 $.

If combined income of George and Weezy falls between base amount and upper limit, upto 50% of social security benefits will be taxable and if it is more than 44,000$, then upto 85% may be taxable.

In the current case, combined income = ( interest + Dividend Income + 50% of social security benefits) = (4800+32200+(50%*29100)) = $51,550 which is greater than $44,000 and hence upto 85% will be taxable.

Hence, social security benefits to be included in gross income shall be lower of :

a) 85% of 29,100 = $24,735 ; or

b) 85% of (Modified AGI + 50% of Social security benefits - 44,000 $) plus lower of : i) 6,000 $ or ii) 50% of social security benefits

= 85% of (51,550-44,000) + lower of (i) $6,000 or (ii) $14,550 = $12,418

Hence social security benefits to be included in gross income = $12,418

(3)

In the current case, combined income = ( interest + Dividend Income + 50% of social security benefits) = (4800+16100+(50%*29100)) = $35,450 which is greater than $32,000 and hence upto 50% will be taxable.

Hence, social security benefits to be included in gross income shall be lower of :

a) 50% of 29,100 = $14,550 ; or

b) 50% of (Modified AGI + 50% of Social security benefits - $32,000)

      = 50% of (35,450-32,000) = $1,725

Hence social security benefits to be included in gross income = $1,725