Up to 85% of Social Security benefits can be taxed. However, it is possible that no Social Security benefits is taxable.
To determine how much of your client’s Social Security benefits is taxable, you must figure your clients modified adjusted gross income. Generally, the modified adjusted gross income is the sum of:
• income
• One-half of Social Security benefits
• Tax-exempt interest
Compare this amount to a base amount. The base amounts are $25,000 for single people, $32,000 for married couples filing jointly, and $0 for married people filing separately. If the modified adjusted gross income is less than your base amount, then none of the Social Security benefits is taxed.
If the modified adjusted gross income is more than the base amount, then a portion of the benefits is taxable. Use the following worksheet to determine the amount that is taxable.
How much of your client's Social Security benefits is taxable?
Modified Adjusted Gross Income MAGI)
Adjusted gross income
(excluding taxable Social Security) _____________________
+ 1/2 of Social Security benefits _____________________
+ Tax exempt interest _____________________
+ Excluded income from U.S. Savings Bonds
used to pay higher education expenses _____________________
+ Excluded income from employer's adoption
assistance program _____________________
+ Qualified education loan interest deduction
+ Foreign income excluded under IRC
Section 911, 931, or 933 _____________________
TOTAL MAGI _____________________
Is the client’s MAGI more than the following:
$44,000 if married filing joint? $34,000 if
single, head of household, or married filing
separately if client and their spouse lived apart
the entire year? $0 if married filing separately
and client and their spouse live together?
If NO, go to 50% Rule
If YES, go to 85% Rule
50% RULE
MAGI from above _____________________
Enter amount for your filing status: _____________________
$32,000 if married filing joint? $25,000 if
single, head of household, or married filing
separately if client and their spouse lived apart
the entire year? $0 if married filing separately
and client and their spouse live together?
Subtract _____________________
Is the above amount more than $0?
If NO,
None of your benefits is taxable
If YES,
1/2 of amount from above calculation _____________________
1/2 of Social Security Benefits _____________________
The smaller of the above amounts is your client’s taxable Social Security benefits
85% RULE
Total Social Security benefits received _____________________ A
Multiply times .5 _________x .5_________
1/2 of Social Security benefits _____________________ B
MAGI from above _____________________ C
Enter amount for your filing status: _____________________ D
$32,000 if married filing joint? $25,000 if
single, head of household, or married filing
separately if client and their spouse lived
apart the entire year? $0 if married filing
separately and client and their spouse live
together?
Subtract D from C _____________________
Multiply times .5 _________x .5_________
Subtotal _____________________ E
Enter amount for your filing status: _____________________ F
$6,000 if married filing joint? $4,500 if
single, head of household, or married filing
separately if client and their spouse lived
apart the entire year? $0 if married filing
separately and client and their spouse live
together?
Compare B, E, and F. Enter the smallest _____________________ G
Enter amount for your filing status: _____________________ H
$44,000 if married filing joint? $34,000 if
single, head of household, or married filing
separately if client and their spouse lived
apart the entire year? $0 if married filing
separately and client and their spouse live
together?
Subtract H from C (if less than $0, enter $0) _____________________
Multiply times .85 _________x .85________
Subtotal _____________________ I
Add G and I _____________________ J
Multiply A times .85 _____________________ K
The smaller of J and K is your taxable Social Security benefits
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