Social Security Taxable Tech Introduction

Social Security Taxable Introduction

There are many confusing parts of the tax law - herein we shall narrow the focus to the effect of one item's effect on Social Security.  This item is the determination of the taxable portion of the Social Security received.

tips2.gif (1662 bytes)   Do not confuse two very different rules about the same subject - Social Security.   One rule is the amount of money one may earn without decreasing the amount of the Social Security check.  The other rule pertains to the taxation of the checks received - which is the subject herein.

Is Any Amount of the Social Security Check Taxed?

The following will assist most of the circumstance for taxpayers.  Use caution and consult with Bob Parrish CPA PC to know whether you have circumstances not written of herein that will change the result.

tips2.gif (1662 bytes) The following are a few of the circumstances which are not covered in this computation:

  1. You made contributions to a traditional IRA for 1999 and you were covered by a retirement plan at work or through self-employment.
  2. You repaid any benefits in 1999 and your total repayments (box 4) were more than your total benefits for 1999 (box 3).
  3. You file form 2555
  4. You file form 2555EZ
  5. You file form 4563
  6. You file form 8815
  7. you exclude employer-provided adoption benefits or,
  8. income from sources within Puerto Rico.

 

ARE THE SOCIAL SECURITY BENEFITS TAXED?

  
1. Adjusted Gross Income (AGI) Excluding any Social Security $
     Add Tax Exempt Interest  
     Add Tax Exempt Dividends  
     Add total of any exclusions for foreign earned income  
     Add total of any exclusions for housing  
     Add in all IRA deductions  
     Add in all student loan interest deducted  
     Add 50% of the total Social Security Benefits from Box 5 of all your forms SSA-1099 or RRB-1099  
2. Total of the above amounts $
3. Write in $32,000 for married filing jointly, or $25,000 for all taxpayers (NOTE: If you are married filing separate and living together, you cannot subtract anything)  
4. Subtract Amount #3 from #2 $
5. Multiply #4 by 50% (1/2) and enter on this line  
Write in the lesser of #5 or 1/2 (50%) of the Social Security - THIS IS THE TAXABLE AMOUNT $
   
   

 

What is Modified Agusted Gross Income ?
 

To arrive at your modified AGI, start with your adjusted gross income and then add back the following items:

  • Any income you excluded because of the foreign earned income exclusion.
  • Any exclusion or deduction you claimed for foreign housing.
  • Any interest income from series EE bonds that you were able to exclude because you paid qualified higher education expenses.
  • Any employer-paid adoption expense you excluded.
  • Any deduction you claimed for an annual (non-rollover) contribution to a regular IRA.

Note that you are not required to add back any contribution you made to an employer plan such as a 401k plan. If you are running up against the limit for modified AGI, one way to reduce that number is to make deductible contributions to an employer plan.