Question

Social security problem:

1. Married taxpayer

Pension income 25000

Social security income 10000

Municipal interest 1000

2. Married taxpayer

Pension income is now 30000

Social security income 10000

Municipal interest 1000

3. Married taxpayer

Pension income is now 37000

Social security income 10000

Municipal interest 1000

4. Married taxpayer

Pension income is now 40000

Social security income 10000

Municipal interest 1000

For all 4 questions: How much is Social security taxable

What is their AGI

Answer 1

we have to calculate AGI to determine whether social security income is taxable or not.

Formula for this as below

(A) Social Security income (given in question)

(B) Half of point (A) Value

(C) Other adjusted gross income (only given as pension in all 4 examples)

(D) Tax exempted Interest Income (Interest on municipal bonds comes under this category )

(E) Adjusted Gross Income (AGI) = (B) + (C) + (D)

Since all 4 given problems are for married taxpaye filing jointly than slab for exemption of social security income will be as follows.

1. AGI less than $ 32000 Social security income exempted

2. AGI Between $32000 to $44000 50% of SSI is taxable

3. AGI Above $44000 85% of SSI is taxable

So, now compute all four problem on the basis of avobe concept.

(1)

S S I 10000

Pention 25000

Municipal Interest 1000

A = 10000

B = 5000

C= 25000

D = 1000

E = B + C + D = 5000 + 25000 + 1000 = $31000

AGI is less than $32000 so all SSI is tax free.

(2)

SSI 10000

Pension 30000

Municipal Interest 1000

A 10000

B 5000

C 30000

D 1000

E = 5000 + 30000 + 1000 = $36000

AGI is between $ 32000 to $44000, so 50% of SSI is taxable means 50% of $10000 = $5000 is taxable

(3)

SSI 10000

Pension 37000

Municipal Interest 1000

A 10000

B 5000

C 37000

D 1000

E 5000 + 37000 + 1000 = $43000

AGI is between $ 32000 to $44000, so 50% of SSI is taxable means 50% of $10000 = $5000 is taxable

(4)

SSI 10000

Pension 40000

Municipal Interest 1000

A 10000

B 5000

C 40000

D 1000

E 5000 + 40000 + 1000 = $46000

AGI is above $ 44000 so 85% of SSI is taxable means 85% of 10000 = $8500 of SSI is taxable.

Notes:-

SSI = Social Security Income

All amounts given are is $ (USD)

If in above problems, in situation of married person filing separately would have given than $0 tax exemption on social security income.