SS and Pensions

Question 1

To find out if a taxpayer’s Social Security benefits may be taxable, all of the following are taken into account EXCEPT:
• interest that is tax-exempt.
• the exclusion for foreign earned income.
• notary fees received.
• unemployment benefits.

Answer 1

the exclusion for foreign earned income.

Question 2

Joey is retired at age 71 and single. But he worked part-time as a bartender in 2017 earning $8,000. He received $5,000 of interest income from certificates of deposit, $2,500 of interest from tax-exempt municipal bonds, and $6,000 of taxable payments from a pension. His Social Security benefit payments in 2017 were $12,000. How much income does Joey compare to the $25,000 base amount to determine if any of his Social Security income is taxable? 
•	 $27,500 
•	 $25,000 
•	 $20,000 
•	 $19,000

Answer 2

27,500

You compare one-half of Social Security plus ALL other income received (including tax free municipal bond interest) to the base amount. $8,000 + $5,000 + $2,500 + $6,000 + $6,000 = $27,500.

Question 3

Elden is 78 years of age and single. He received Social Security benefits of $15,000, which includes $500 for Medicare premiums. His pension income was $57,000. He also had received $1,500 dollars of interest income, $700 of rental income and $1,600 of dividends. How much is Elden's adjusted gross income?
•	 $72,850
•	 $73,550
•	  $68,300
•	 $72,050

Answer 3

73550

Elden’s provisional income of $68,300 is the sum of 1/2 of his social security benefits or $7,500, $57,000 of pension income, interest income of $1,500, dividends of $1,600, and rental income of $700. His provisional income of $68,300 is compared to the upper base amount for single taxpayers of $34,000.
The amount of his social security benefits included in income is limited to a maximum of 85% of his social security amount. This question asks for the amount of Elden’s adjusted gross income. His adjusted gross income is the sum of 85% of his social security benefits $12,750 (85% × $15,000), pension income of $57,000, interest income of $1,500, gross rental income of $700, and $1,600 of dividends for adjusted gross income of $73,550.