SS Income Rule:
The amount of social security benefits that is taxed is dependent on whether the combined income (AGI plus interest on tax-exempt bonds and 50% of the social security benefits) is greater than a threshold amount. If the combined income is less than the threshold, the amount taxed is the lesser of 1) 50% of the benefits or 2) 50% of the excess of the combined income over the threshold. If the combined income is greater than the threshold, the amount taxed is the lesser of 1) amount calculated above plus 85% of the excess of the combined income over the threshold or 2) 85% of the benefits. Thus, 85% of the benefits is the maximum amount of benefits that may be included in gross income.
Example:
A grandma, widow receives $100,000 annual SS income. How much income is taxable?
Is my computation correct?
$100,000
-$25,000
$75,000
-$34,000 (Upper income bracket)
$41,000 x 85$ =
$34,850+
(41,000-34,000) – $9,000 x 50% = $4,500+
========================== $39,350 Taxable SS Income??
.