Question

During the current year, Margaret and John received $24000 in Social Security benefits. The amount of their adjusted gross income for the year before any Social Security income was $35000 and they received $9000 in tax-exempt income. What is the amount of Social Security income that will be included in AGI?

Answer 1

Assuming the $9,000 tax-exempt income to be income in the nature of interest which is tax-free, the amount of Social Security income that will be included in AGI comes out to $20,400 based on the below given table as supported by Publication 915 (2019) as published by the IRS.

Modified AGI in this case is $35,000 + $9,000 + $0 + ($24,000 / 2) = $56,000 ( Computes as per the Note in the last line of above image)

Amount calculated as per line 5 is lower of:-

• 50 percent of benefit income ($24,000 * 50% = $12,000); or
• modified AGI in excess of $32,000 ($56,000 - $32,000 = $24,000)

Since, MAGI is more than $44,000 in case of married and jointly filing, Taxable Social Security income would be lesser of:-

• 85 percent of benefit income ($24,000 * 85% = $20,400) ; or
• amount from line 5 plus 85 percent of modified AGI in excess of $44,000 ($12,000 + 85% of ($56,000 - $44,000) = $12,000 + 85% * $12,000 = $22,200

Hence, as per the above calculations, the amount of Social Security income that will be included in AGI is $20,400.

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