Question

Mr. & Mrs Smith are retired and receive Social Security Benefits of $18,000 per year.
In addition, they received tax-exempt interest of $4,000. Determine the amount of taxable
Social Security benefits assuming they also receive a taxable pension benefit of:
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a) $25,000
b) $40,000

Answer 1

Taxation of social security benefit is dependent on whether your 1/2 of social security benefit+ other income inculding tax free income exceed $32000 for married couple

a)social secuity benefit=$18000, other income= pension income=$25000+tax exempt income= $4000

= 1/2 of social security + other income= $9000+$25000+$4000=$38000. since this is in bracket of $32000to $44000 for married couple filing jointly so 50% of social security is taxable= so 50% of $18000 $9000 is taxable .

b)social secuity benefit=$18000, other income= pension income=$40000+tax exempt income= $4000

= 1/2 of social security + other income= $9000+$40000+$4000=$53000. since this is exceeds $ 44000 for married couple filing jointly so 85% of social security is taxable= so 85% of $18000 = $15300 is taxable .