In: Accounting
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
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.