Question

Question2 071 p E, who is 68 years old and married, retired on July 1 of the current year. His current year income is shown below Pension payments (all taxable) Dividends . ...2,000 3,000o Assume E has no deductions for adjusted gross income and that Mrs. E has no income. The amount c social security benefits that E must include in taxable income on a joint return for the current year is 2250 2500 5000

Answer 1

Social Security Benefits are taxable if a person has any significant income besides those benefits. Whether or not your benefits are taxable is dependent on your combined income.
Combined Income = Adjusted Gross Income + Non Taxable interest + 50% of security benefits

In the case of married person and filing a joint return of tax, then if the Combined Income ranging exceeds $32000, then the person may have to pay tax on up to 50% of the benefits.

In the given case, the taxable security benefits can be computed as follows :
Combined Income = ($15000 + $14000 + $2000) + ($3000) + (50% of $5000) = $36500
The combined income exceeds the limit of $32000 by $4500, i.e. ($36500 - $32000)

Taxable portion of the Security benefits will be 50% of the amount exceeding the limit, i.e. 50% of $4500 = $2250

Therefore, E must include $2250 in taxable income in his joint return.

The correct answer is Option B.