Question

Ian, a single taxpayer, received $15,000 of Social Security retirement this year. He also received $16,000 of interest income. How much of Ian’s Social Security benefits must be included in his gross income this year?

Answer 1

Answer:0. none of Ian's social security benefit will be included in his gross income

Explanation:

Given the following ;

Social security retirement = $15,000

Interest income received = $16,000

Ian is a social security recipient.

Therefore to calculate his combined income:

Modified Adjusted Gross Income = $16,000

50% of social security benefit

0.5 × $15,000 = $7,500

Ian's combined income = $(7500+16000) = $23,500

For single taxpayers, if combined income is less than $25,000, then such individual does not have to pay tax on social security benefit for that year.

Therefore,

Ian's combined income < $25,000

So, none of Ian's social security benefit will be included in his gross income

Answer 2

Answer:

Explanation:

Combined income is $15,000+$16,000 = $31,000

It is between $25,000 and $34,000, meaning Ian has to pay income tax on up to 50% of Social Security benefits.

So 50% 0f the Social Security benefits must be included. $15,000*50% = $7,500