Question

Exercise 4-26 (Algorithmic) (LO. 4) 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 "o". a. Erwin and Eleanor are married and file a joint tax return. They have adjusted gross income of $43,000, no tax-exempt interest, and $15,050 of Social Security benefits. As a result, $ of the Social Security benefits are taxable. b. Assume Erwin and Eleanor have adjusted gross income of $17,200, no tax-exempt interest, and $18,920 of Social Security benefits. As a result, s of the Social Security benefits are taxable. C. Assume Erwin and Eleanor have adjusted gross income of $94,000, no tax-exempt interest, and $14,100 of Social Security benefits. As a result, s of the Social Security benefits are taxable.

Answer 1

For married couple filing jointly Provisional income % Social Security benefits taxable below $32,000 Nil 32,001 - 44,000 50% $44,001 and above 85% Provisional income = Adjusted Gross Income(AGI) +non-taxable interest + 50% of social security benefits a) Provisional income = 43,000 + 0 + (50% of 15,050) = 43,000 + 0 +7,525 = $50,525 > $44,000 Therefore, Social Security benefits taxable = 85% of 15,050 = $12,793 b) Provisional income = 17,200 + 0 + (50% of 18,920) = 17,200 + 0 +9,460 = $26,660 < $32,000 Therefore, Social Security benefits taxable = Nil = 0 c) Provisional income = 94,000 + 0 + (50% of 14,100) = 94,000 + 0 +7,050 = $101,050 > $44,000 Therefore, Social Security benefits taxable = 85% of 14,100 = $11,985