Question

Exercise 4-26 (Algorithmic) (LO. 4)

Determine the taxable amount of Social Security benefits for the following situations.

If required, round your answers to the nearest dollar. If an amount is zero, enter "0".

a. Erwin and Eleanor are married and file a joint tax return. They have adjusted gross income of $39,800, no tax-exempt interest, and $13,930 of Social Security benefits. As a result, $ of the Social Security benefits are taxable.

b. Assume Erwin and Eleanor have adjusted gross income of $18,400, no tax-exempt interest, and $20,240 of Social Security benefits. As a result, $ of the Social Security benefits are taxable.

c. Assume Erwin and Eleanor have adjusted gross income of $97,000, no tax-exempt interest, and $14,550 of Social Security benefits. As a result, $ of the Social Security benefits are taxable.

Answer 1

Part 1

combined income = adjusted gross income + nontaxable interest + half of your Social Security benefits = 39800+0+(13930/2)=$46765

For Married filling jointly, the combined income is more than $44000. Therefore 85% of social security benefits are taxable

Social Security benefits taxable = 13930*85%= $11841

Part 2

Combined income = 18400+0+(20240/2)=28520

For the married filling jointly, the combined income is less than $32000. Therefore no social security benefits are taxable.

Social Security benefits taxable = $0

Part 3

Combined income = 97000+0+(14550/2)=104275

For the married filling jointly, the combined income is more than $44000. Therefore 85% of social security benefits are taxable.

Social Security benefits taxable = 14550*85%=$12368