E, who is 68 years old and married, retired on July 1 of the current year.His current year income is shown below. Salary (prior to retirement) $\quad \$ 15,000$
Pension payments (all taxable) $\quad$$\quad$14,000
Dividends $\quad$$\quad$$\quad$$\quad$$\quad 2,000$
Tax-exempt bond interest $\quad$$\quad 3,000$
Social security benefits $\quad$$\quad$5,000 Assume E has no deductions for adjusted gross income and that Mrs.E has no income.The amount of social security benefits that E must include in taxable income on a joint return for the current year is

Question

Quizplus · Accepted Answer

To determine the taxable portion of Social Security benefits, one must consider combined income, which includes adjusted gross income, nontaxable interest (such as tax-exempt bond interest), and half of Social Security benefits. Here, combined income is $15,000 (salary) + $14,000 (pension) + $2,000 (dividends) + $3,000 (tax-exempt interest) + $2,500 (half of Social Security benefits) = $36,500. For a married couple filing jointly, up to 50% of Social Security benefits may be taxable if combined income is between $32,000 and $44,000. Thus, $2,500 (50% of $5,000) of E's Social Security benefits are taxable.

E, Who Is 68 Years Old and Married, Retired on July