Wow, here's a fun problem!:
Blake, a single individual age 67, had a 2016 adjusted gross income of $60,000 exclusive of Social Security benefits. Blake received Social Security benefits of $8,400 and interest of $1,000 on tax-exempt obligations during 2016. What amount of Social Security benefits is excludable from Blake's 2016 taxable income?
A.$0
B $4,200
C.$4,700
D. $1,260 — CORRECT
Explanation:
“A portion of a taxpayer's Social Security benefits may be taxable.
For single taxpayers with provisional income above $34,000, gross income includes the lesser of:
85% of Social Security benefits received or
85% of excess of provisional income (defined as modified AGI + 1/2 Social Security benefit) over $34,000, plus the smaller of:
the amount includible under the old law (1/2 of Social Security) or
$4,500.
1. 0.85 x $8,400 = $7,140
2. $60,000 AGI
+ 1,000 Interest on tax-exempt obligations
——-
$61,000 Modified AGI
+ 4,200 1/2 of Social Security
——-
$65,200 Provisional income
– 34,000 Threshold amount
——-
$31,200 x .85 = $26,520
+ 4,200 Lesser of $4,200 or $4,500
——-
$30,720
=======
LESSER OF (1) OR (2) = $7,140 (This is the INCLUDIBLE amount)
$8,400 total Social Security benefits
– 7,140 includible amount
——
$1,260 is EXCLUDABLE from taxable income
======”
I'm trying to pick my battles and am not sure this is even worth spending my time trying to memorize :/
FAR - 78
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BEC - 82
AUD - Aug 16
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