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 "0".

a. Erwin and Eleanor are married and file a joint tax return. They have adjusted gross income of $38,200, no tax-exempt interest, and $13,370 of Social Security benefits. As a result, $ of the Social Security benefits are taxable.

b. Assume Erwin and Eleanor have adjusted gross income of $15,000, no tax-exempt interest, and $16,500 of Social Security benefits. As a result, $ ----------------------------of the Social Security benefits are taxable.

c. Assume Erwin and Eleanor have adjusted gross income of $92,500, no tax-exempt interest, and $13,875 of Social Security benefits. As a result, -----------------------------$ of the Social Security benefits are taxable.

Answer 1

Ans-a-

1-0.50($13,370 Social Security Benefits)= $6,685

2-0.50 [$38,200+0.50($13,370)-$32,000]=0.50($12,885)=$6,442.50

The Erwin and Eleanor must include $6,442.50 of the Social Security Benefit in gross income .

Ans-b-

1-0.50 ($16,500 Social Security Benefits)=$8,250

2- 0.50[$15,000+0.50($16,500)-$32,000]=0.50*-$8,750=$0

None of the benefits would be taxable as the result is not a positive number.

The Erwin and Eleanor must include $0 of the benefits in gross income.

Ans-c-

1-0.85($13,875 Social Security Benefits)=$11,793.75

2- Sum of

a-0.85[$92,500+0.50($13,875)-$44,000 second base amount= 0.85($55,437.50)=$47,121.875

b-Lesser of

-0.50($13,875 Social Security Benefits)=$6,937.50

-0.50[$92,500+0.50($13,875)-$32,000=0.50($67,437.50)=$33,718.75

The sum equals to $47,121.875+6,937.50=$54,059.375

Therefore 85% of the Social Security Benefits $11,793.75 is included in the couple's gross income.

The Erwin and Eleanor include Social Security Benefits will be $11,793.75 .