SOCIAL SECURITY TAXATION: EXAMPLE 1
01.Core Concepts
Julianna, a single tax filer, received the following this year: • $15,000 of Social Security retirement benefits • $5,000 of interest income • $3,000 of dividend income • $18,000 of income from her retirement plan Since her MAGI plus one-half of her Social Security benefits exceeds her base amount but not her adjusted base amount, her includible Social Security benefits will use the “50% formulas.” • Half of her Social Security benefits is $7,500. • The second formula yields an inclusion amount of $4,250 [0.5 x ($26,000 + $7,500 - $25,000)]. • She will include $4,250 in her gross income.