Mr. and Mrs. McGraw received $50,160 Social Security benefits this year. They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio. How much of the McGraws' Social Security is included in gross income?

Question

Quizplus · Accepted Answer

The amount of Social Security benefits that are included in gross income is determined by calculating the couple's provisional income. To do this, you add together their adjusted gross income (which includes their taxable pension payments and investment income) plus half of their Social Security benefits.

Provisional income = Adjusted gross income + 1/2 Social Security benefits
Provisional income = $108,000 + $47,300 + 1/2($50,160)
Provisional income = $108,000 + $47,300 + $25,080
Provisional income = $180,380

Since their provisional income is over $44,000 (for a married couple filing jointly), some of their Social Security benefits are included in gross income. The amount that is included is the lesser of:
- 50% of their total Social Security benefits
- 50% of the amount that their provisional income exceeds the $44,000 threshold

In this case, the amount that is included is:
50% of $50,160 = $25,080

Therefore, the answer is C, $42,636 of their Social Security benefits are included in gross income.

Mr and Mrs