Determining whether Social
Security Income is taxable causes a lot of confusion. Beliefs regarding an answer are usually black
and white. Most believe that Social
Security income is never taxable. Well,
this blogger's Mother told her at a young age, "the only sentence that should
use the word never is this one". As we
know, much in life is not black and white, and neither is the answer to this
question.
To determine if Social Security
income is taxable, start by noting the filer(s) filing status. Then, take:
1)
One-half of the Social Security benefits, plus
2)
All other income, including
tax exempt interest.
When making this calculation, do
not reduce other income by any exclusion for:
-
Interest from qualified US Savings Bonds
-
Employer-provided adoption benefits
-
Foreign earned income or foreign housing, or
-
Income earned in American Samoa or Puerto Rico
by bona fide residents.
If the total is more than the
base amount for the filing status, part of the benefits may be taxable. If married and filing joint, combine income
and benefits. Even if the spouse did not
receive benefits, add spouse's income to the taxpayer's income.
Base amounts for tax year 2010,
by filing status are:
Single, Head of Household, or
Qualified Widow(er): $25,000
Married Filing Joint: $32,000
Married Filing Separate and
lived apart from spouse
for all of the
year: $25,000
Married Filing Separate and
lived with spouse at
any
time during the year: $0
Consult Publication 915 for
additional information and as always, if you are still confused, make life
simpler by consulting a tax professional.
For the Liberty Tax Service office closest to you, click here and enter your zip code
at the top left of the page.
Every
effort has been taken to provide the most accurate and honest analysis of the
tax information provided in this blog. Please use your discretion before making
any decisions based on the information provided. This blog is not intended to
be a substitute for seeking professional tax advice based on your individual
needs.