Question

Ervine received Social Security benefits during the current year of $15,400. Ivette’s only other sources of income were wages of $16,000, interest income from corporate bonds of $4,000, and taxable domestic dividends of 1,100. Ervine is single, 72-years of age, and has no dependents.

A) Calculate Ervine AGI

B) What would be Ervine AGI if Ervine also had tax-free municipal bond interest income of $9,600

Answer 1

A Calculation of Ervine Ajusted Gross Income Particulars Amount ($) Wages 16000 Interest from corporate bonds 4000 Taxable dividends 1100 Social security benefits 7700 Adjusted Gross Income 28800 Combined income = 21100 + 50% of 15400 = 28800 Combined income is more than $24000 therefore 50% of SSB is taxable * For Individual Receiving social security benefits if the combined income is <$25000 No tax $25000<$34000 Tax on 50% SSB >$34000 Tax on 80% SSB Combined Income Adjusted gross income + Non taxable interest + 50% of SSB

B Calculation of Ervine Ajusted Gross Income Particulars Amount ($) Wages 16000 Interest from corporate bonds 4000 Taxable dividends 1100 Social security benefits 12320 Adjusted Gross Income 33420 Combined Income = 21100+7700+9600 = 38400 Combined income is more than $34000 therefore 80% of SSB is taxable