Tuesday, January 16, 2007



On a joint return, if total income, including social security, exceeds $ 48000, then half of the social security is taxed. If the total income exceeds $ 60,000 the amount over $60,000 is taxed at 85% from that point and up.

Situation No. 1: Taxpayer and spouse get $ 16,000 each in social security and their only other income is $16,000 from tax-exempt bonds. Result: No taxable income.

Situation No. 2: Same except the tax-exempt interest is $16,002

Social Security …..……….…$32,000

Tax Exempt Interest……….$16,002

Total Income……………....….$48,002

. Result: $1 taxable income. (Total income including tax-exempt interest and social security exceeds $ 48000 by $ 2, so half of the excess becomes the taxable portion of social security)

Situation No. 3.

Social Security……......$32,000

Tax Exempt Interest..16,000

IRA Withdrawal....……10,000

Total Income……....….$58,000

Result:$ 15000 taxable income [$16,000 Tax-exempt interest + $10,000 +$5,000 taxable social security] Half of ($ 58,000 - $48,000) = Taxable Social security of $ 5,000..

Situation No 4. (Income Exceeds $ 60,000)

Social Security …..…......$32,000

Tax Exempt Interest...…16,000

IRA Withdrawal…....….…12,002

Total Income………....…...60,002

Taxable Social Security $ 6002

(60,000 –48,000) X 50% =6000

($ 60002 – 60000) X 85% = $1.70 (rounded to $ 2)

$6000 + $ 2 = $6002 taxable social security..

Taxable Income:

IRA Withdrawal…...$ 12,002

Taxable SS………...……..6002

Taxable Income……..$ 18004

There is no tax due since the standard deduction and exemptions exceed the taxable income.

TOMORROW’S BLOG will illustrate the effect of adding a $ 100,000 Capital Gain which will result in 85% of the Social Security becoming taxable.

LINKS and References – go to

IRS References

To Contact me taxxcpa2007@hotmail.com


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This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.


taxxcpa said...

Usually $32,000 is cited as the point at which SS becomes taxable.
That refers to taking half of social security (Half of $32,000 in my exampole) or 16,000 and adding the 16000 tax exempt interest 16000+16000=32000 (using half the SS)
but if you use ALL SS, then the total involved is $48000. (32000+16000)

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