Edward and Ethel are ages 71 and 59,respectively,and file a joint return.They have AGI of $11,000 and received $2,000 in nontaxable social security benefits.How much can Edward and Ethel take as a credit for the elderly or the disabled?
A)$375.
B)$1,125.
C)$2,000.
D)$2,500.

Question

Quizplus · Accepted Answer

To calculate the credit for the elderly or disabled, we first need to determine the taxable portion of their Social Security benefits. We can do this using the base amount and the formula for Social Security taxation. The base amount for a married couple filing jointly in 2021 is $32,000.

$2,000 (nontaxable Social Security benefits) + $11,000 (AGI) = $13,000

$32,000 - $13,000 = $19,000 (this is the excess over the base amount)

Since the excess ($19,000) is less than the $25,000 threshold for a married couple filing jointly, all of their Social Security benefits are nontaxable.

To calculate the credit, we need to look at their AGI. The credit is equal to 15% of the amount by which AGI exceeds the base amount of $13,000.

$11,000 (AGI) - $13,000 = -$2,000

Since AGI is less than the base amount, the credit is zero. However, the credit is also limited to the amount of nontaxable Social Security benefits received. Therefore, the maximum credit they can take is $375 (15% of $2,000).

Edward and Ethel Are Ages 71 and 59,respectively,and File a Joint