Question

In addition to Social Security benefits of $16,000, Le Wei has adjusted gross income of $36,000 and tax-exempt interest of $4,000. He will file a tax return as single. The taxable portion of his Social Security benefits will be

A) $8,000. B) $13,600. C) $16,000. D) $16,400.

Answer 1

• Up to 50% of Social Security benefits are taxed on income from $25,000 to $34,000 for individuals or $32,000 to $44,000 for married couples filing jointly.
• Up to 85% of benefits are taxable if the income level is over $34,000 for individuals or $44,000 for couples.
• tax-exempt interest is not subject to income taxes, it is not included in the calculation of adjusted gross income (AGI) for taxation purposes.

here Le Wei have adjusted gross income of $36000, as an individual 85% of social security benefits of $16,000 should be adjusted.

therefore,

taxable portion of social security benefit= 16,000*85%= $ 13600