Question

Which of the following statements is true regarding the taxation of Social Security benefits?

a.85% is the maximum amount of taxable Social Security benefits.

b.50% is the maximum amount of taxable Social Security benefits.

c.If a taxpayer’s only source of income is $10,000 of Social Security benefits, then 50% of the benefits are taxable.

d.If a taxpayer’s only source of income is $10,000 of Social Security benefits, then 85% of the benefits are taxable.

Answer 1

Answer is a - 85% is the maximum amount of taxable Social Security benefits

The taxability portion of Social Security benefits depends on combined income or Provisional income.

Combined Income is calculated by adding total income (including tax-exempt interest income to the half of the amount of annual Social Security benefit.

Therefore, Combined Income = Total income + (Annual Social security benefits*1/2)

During 2018, the taxable portion of annual Social Security benefits is as follows:

Filing Status	Combined income (Or Threshold limit)	Taxable portion of annual Social security benefits
Married filing jointly	$32,000 or Less	0%	0% of Social security benefits are taxable
	$32,001 to 44,000	upto 50%	Upto 50% of Social security benefits are taxable
	Exceeds $44,000	upto 85%	Upto 85% of Social security benefits are taxable
Married filing separately (and you lived with your spouse throughout the year)	Whatever the combined income	0%	0% of Social security benefits are taxable
Others	$25,000 or less	0%	0% of Social security benefits are taxable
	$25,0001 to $34,000	Upto 50%	Upto 50% of Social security benefits are taxable
	Exceeds $34,000	Upto 85%	Upto 85% of Social security benefits are taxable

Therefore, in any case, maximum taxable portion of social security benefit is 85%.