Marvin and Stacy are retired. During the current year, they receive $10,000 in Social Security benefits. They have $45,000 of other taxable gross income and receive $23,000 of municipal bond interest. The taxable portion of the $10,000 Social Security payment is:
A)$-0-
B)$5,000
C)$8,500
D)$10,000

Question

Quizplus · Accepted Answer

The taxable portion of Social Security benefits is calculated based on their combined income, which includes half of the Social Security benefits received and all other taxable gross income. 
Their combined income is $45,000 + ($10,000/2) = $50,000. This exceeds the threshold of $32,000 for a married couple filing jointly, which means that up to 85% of their Social Security benefits are taxable. 
Therefore, the taxable portion of their $10,000 Social Security payment is $8,500 (85% of $10,000).

Marvin and Stacy Are Retired