Question

Exercise 4-26

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, $ 7,030 of the Social Security benefits are taxable.

Answer 1

Answer

Social Security benefit taxable

Married filing Jointly

Sl No Provisional Income ($) Taxable portion of Income

1 Less than $ 32000 NIL

2. Between $ 32000 - $ 44000   Least of

a) 50% of benefit income

b) 50% of Provisional Income in excess of $ 32000

(Maximum $ 6000)

3. More Than $ 44000    Least of the

   a) 85 % of benefit income

   b) 85 % of Provisional Income in excess of $ 44000 plus $ 6000

Note : Provisional Income Means = Adjusted Gross Income+ non tax exempt Income + 1/2 percentage of social security benefit

Provisional Income = $ 39200+1/2 of 13720 = $ 46060 is excess of $ 44000, so third option can be selected

1) 85% of Taxable Benefit of social Security Benefit = $ 13720*85% = 11662

Taxable benefit of social security benefit ={ ($39200+.50*$13720)-$44000)*85%)+6000

= {46060-44000}*85%+6000

= $ 7751

=======

Least of the above (Social security Benefit) = $ 7751

=======