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taxation_social_security_benefits_solution

taxation_social_security_benefits_solution - Solution...

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Solution : Taxation of Social Security benefits Part 1 : Diane & Roy Crowell are married taxpayers with a taxable pension of $22,000, tax-exempt interest of $5,000, and Social Security benefits of $8,000 Required : What amount, if any, of the Crowell’s Social Security benefits are taxable for the year? Provisional income: Adjusted gross income (taxable pension) $22,000 + Tax-exempt income 5,000 + 50% of Social Security 4,000 31,000 Lower base – MFJ 32,000 Provisional income < lower base, so… Taxable Social Security $0 Crowell’s revised adjusted gross income $22,000 ($22,000 + $0) Part 2 : Diane & Roy Crowell are married taxpayers with a taxable pension of $32,000, tax-exempt interest of $5,000, and Social Security benefits of $8,000 Required : What amount, if any, of the Crowell’s Social Security benefits are taxable for the year? Provisional income: Adjusted gross income (taxable pension) $32,000 + Tax-exempt income 5,000 + 50% of Social Security 4,000 41,000 Lower base – MFJ 32,000 Provisional income > lower base, so… Taxable Social Security = lesser of: 50% of Social Security 4,000 50% of provisional income > $32,000
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