In addition to Social Security benefits of $8,000,Mr.and Mrs.Wells have adjusted gross income of $32,000 and tax-exempt interest of $1,000.They will file a joint return.The taxable portion of their Social Security benefits will be
A)$0.
B)$2,500.
C)$4,000.
D)$8,000.

Question

Quizplus · Accepted Answer

To determine the taxable amount of Social Security benefits, you need to calculate the couple's provisional income, which is their adjusted gross income plus any tax-exempt interest and half of their Social Security benefits.

In this case, the provisional income is: 
$32,000 + $1,000 + ($8,000/2) = $39,000

Since their provisional income is between $32,000 and $44,000 (for married filing jointly), up to 50% of their Social Security benefits are taxable.

50% of $8,000 = $4,000

However, Social Security benefits first offset any deductions or exemptions the taxpayers may have. In this scenario, the couple's standard deduction for married filing jointly is $24,800.

So, their taxable income is: 
$32,000 + $1,000 - $4,000 - $24,800 = $4,200

Therefore, the taxable portion of their Social Security benefits is $2,500.

In Addition to Social Security Benefits of $8,000,Mr