Brandon and Jessica, a married couple, receive $21,000 in Social Security benefits in the current year.They receive $88,000 in taxable pension payments and $6,000 in municipal bond interest income.How much of their Social Security benefits are included in gross income?
A)$21,000
B)$17,850
C)$10,500
D)$0

Question

Quizplus · Accepted Answer

To determine the taxable portion of Social Security benefits for Brandon and Jessica, we first calculate their combined income, which includes their taxable pension, municipal bond interest (which is generally not taxable but is included in the calculation for Social Security taxation), and half of their Social Security benefits. This calculation is: $88,000 (pension) + $6,000 (municipal bond interest) + $10,500 (half of Social Security benefits) = $104,500. Based on IRS rules, for couples filing jointly with combined income between $32,000 and $44,000, up to 50% of Social Security benefits may be taxable. If the combined income is more than $44,000, up to 85% of benefits may be taxable. Since their combined income exceeds $44,000, up to 85% of their Social Security benefits could be taxable. Therefore, 85% of $21,000 is $17,850, which is the portion of their Social Security benefits included in gross income.

Brandon and Jessica, a Married Couple, Receive $21,000 in Social