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Tax calculation on Social Security Benefits

Social Security Benefits may be taxable depending on the revised adjusted gross income(RAGI) which is the sum of adjusted gross income(AGI), half of the social security benefits and tax-exempt interest, if any. If the RAGI is below $25000.0 for single filers($32000.0 for married filing jointly) then none of social security benefits are taxable. If the RAGI is in between $25000.0 for single filers($32000.0 for married filing jointly) and $34000.0 for single filers($44000.0 for married filing jointly), then upto 50% of social security benefits are taxable. If the RAGI is above $34000.0 for single filers($44000.0 for married filing jointly), then upto 85% of social Security benefits are taxable.

Example 1.

John, filing status single, has AGI $20000.0 in 2016. Assume that he has received $4000.0 social security benefits and has $1000.0 tax-exempt interest. His RAGI is $23000.0.

RAGI = 20000.0 + (1./2.)*4000.0 + 1000.0 [AGI + half of the social security benefit + tax-exempt interest] = $23000.0

Since John's RAGI is below $25000.0, the $4000.0 social security benefits are not taxable

Taxable income = 20000.0 - 6300.0 - 4050.0 [AGI - Standard Deduction - Exemption] = $9650.0

John's taxable income is $9650.0 and he is in 15% tax bracket

Tax = 9275.*0.1 + (9650.0 - 9275) * 0.15 [First $9275 is taxed 10% rate and remaining is taxed 15% rate] = $983.75

Example 2.

John, filing status single, has AGI $30000.0 in 2016. Assume that he has received $4000.0 social security benefits and has $1000.0 tax-exempt interest. His RAGI is $33000.0.

RAGI = 30000.0 + (1./2.)*4000.0 + 1000.0 [AGI + half of the social security benefit + tax-exempt interest] = $33000.0

Since John's RAGI is above $25000.0 and below $34000.0, smallest of following two amounts is taxable for the social security benefits:

That is, $2000.0 of social security benefits is taxable and that need to be included in AGI

AGI = 30000.0 + 2000.0 = $ 32000.0

Taxable income = 32000.0 - 6300.0 - 4050.0 [AGI + - Standard Deduction - Exemption] = $21650.0

John's taxable income is $21650.0 and he is in 15% tax bracket

Tax = 9275.*0.1 + (21650.0 - 9275) * 0.15 [First $9275 is taxed 10% rate and remaining is taxed 15% rate] = $2783.75

Example 3.

John, filing status single, has AGI $23000.0 in 2016. Assume that he has received $18000.0 social security benefits and has $1000.0 tax-exempt interest. His RAGI is $33000.0.

RAGI = 23000.0 + (1./2.)*18000.0 + 1000.0 [AGI + half of the social security benefit + tax-exempt interest] = $33000.0

Since John's RAGI is above $25000.0 and below $34000.0, smallest of following two amounts is taxable for the social security benefits:

That is, $4000.0 of social security benefits is taxable and that need to be included in AGI

AGI = 23000.0 + 4000.0 = $ 27000.0

Taxable income = 27000.0 - 6300.0 - 4050.0 [AGI + - Standard Deduction - Exemption] = $16650.0

John's taxable income is $16650.0 and he is in 15% tax bracket

Tax = 9275.*0.1 + (16650.0 - 9275) * 0.15 [First $9275 is taxed 10% rate and remaining is taxed 15% rate] = $2033.75

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Owner of the CapitalCalc web site does not warrant the correctness or accuracy of the calculators or articles. I am not a tax or financial or investment professional. All the calculations provided on this site are for informational and entertainment purposes only and do not constitute professional financial calculations or advice. We are not tax or personal finance professional. Consult a qualified professional for any form of investment, tax and personal finance calculation and advice
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