Question

Grady received $8,720 of Social Security benefits this year. Grady also reported salary and interest income this year.
What amount of the benefits must Grady include in his gross income under the following five independent situations? (Leave no answer blank. Enter zero if applicable.)

1. Grady files Single and reports salary of $13,400 and interest income of $380

2. Grady files Single and reports salary of $23,430 and interest income of $730

3. Grady files married joint and reports salary of $77,600 and interest income of $630

4. Grady files married joint and reports salary of $44,000 and interest income of $830

5. Grady files married separate and reports salary of $23,430 and interest income of $730.

Answer 1

Solution:

a. The amount of benefit that Grady include in his gross income = $0

Since, The sum of modified AGI plus 50% Social Security benefits he received (i.e. $13,400 + 380 + $8,720*50% = $18,140) is below the minimum amount ($25,000 or less for single taxpayers) for including Social Security benefits.

b. The amount of benefit that Grady include in his gross income = $1760

Since, in this case Grady files single and his modified AGI plus 50% of his Social Security benefits (i.e. $23,430 + 730 + $4,360 = $28,520) falls between $25,000 and $34,000.

Thus, his taxable Social Security benefits = (a) $8,720*50%= $4,360 or 50%of [$28,520 - $25,000] Whichever is less

   = (a) $4,100 or $1760 whichever is less = $1760

c. The amount of benefit that Grady include in his gross income = $7,412

Since, in this case he files married & jointly, he will include 85% of total Social Security benefits = $8,720*85% = $7,412 because his modified AGI is above the maximum amount of $44,000 for married filing jointly for including Social Security benefits.

d. The amount of benefit that Grady include in his gross income = $

Since, here Grady files married jointly and his modified AGI + 50% of Social Security benefits (i.e. $44,000 + 830+ $4,360 = $49,190) are greater than $44,000.

Thus, taxable social security benefits = (a) 85% of $8,720 = $7,412 or (b) 85% of (49,190 - 44,000) = $5,190 + lesser of 6,000 or 4,360 whichever is less

   = (a) $7,412 or (b) $5,190 + 4,360 = $9,550 whichever is less

   = $7,412

e. The amount of benefit that Grady include in his gross income = $7,412

Since, here Grady files married & separately:

Thus, taxable social security benefits = (a) 85% of $8,720 = $7412 or (b) 85% of ( $23,430 + 730 + $4,360 = $24242 ,whichever is less

= $7,412

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