Question

Sean, who is single, received social security benefits of $8,000, dividend income of $13,000, and interest income of $2,000. Except as noted, those income items are reasonably consistent from year to year. At the end of 2018, Sean is considering selling stock that would result in an immediate gain of $10,000, a reduction in future dividends of $1,000, and an increase in future interest income of $1,500. What amount of social security benefits is taxable to Sean?

Answer 1

Taxability of social security benefits depends on many facts. Basically if Sean didn't sell the stock, the social security benefits would not be taxed at all but as there is a capital gain these social security benefits would be taxable to the extent of 50%. Even if there is no capital gain but there is a loss in that situation too the social security benefits are taxable to the extent of 50%.

So $8,000 x 50% = $4,000 of social security benefits are included in the taxable income.