Question

During the 2019 tax year, Thomas and Yolanda received $30,000 in Social Security benefits. The amount of their pension for the year was $33,000 and they received tax-exempt interest income of $18,000. Calculate the amount of the Social Security benefits that Thomas and Yolanda must include in their gross income for 2019. SHOW ALL WORK!

Answer 1

CALCULATION OF SOCIAL SECURITY BENEFITS TO BE INCLUDED IN GROSS INCOME

Here we can assume the thomas and yolanda are married couple

STEP -1

First we want to calculate adjusted gross income.

Taxable pension recieved by the couple =$33000

ADD: tax exempt interest =$18000

ADD:1/2 of social security benefits(1/2x$30000)=$15000

Adjusted gross incoem =$66000

STEP 2-

CALCULATION OF SOCIAL SECURITY BENEFITS TO BE ADDED WITH GROSS INCOME

Adjusted gross income is greater than $32000 (slab for married couple) then 50% of the excess should be added to gross income

Adjusted gross income is greater than $44000 (slab for married couple) then 85% of the excess should be added to gross income

then the calculation is as follows

50% of excess amount from slab $32000 to $44000 ,that is $ 12000x 50%=6000

85% of excess amount in excess of slab $44000 ,that is ($66000-$44000)x 85%=$18700

So total would be added to gross income is ($6000+$18700)=$24700