Taxable Social Security Benefits

Pursuant to the Internal Revenue Code, social security benefits are taxable within certain parameters. In circumstances where the taxpayer(s) earnings, including social security benefits, exceed the calculated base amount the benefits may be taxable up to fifty (50) percent and increase up to eighty-five (85) percent if either of the following applies:

Earnings plus fifty (50) percent of benefits total more than $34,000 if filing single, head of household, a qualified widow(er), or married filing separately and did not live with spouse at any time during the tax year;
Earnings plus fifty (50) percent of benefits total more than $44,000 if married filing jointly; or
Married filing separately and lived with spouse at any time during the tax year.

To determine whether social security benefits are taxable, a taxpayer(s) may compare the amount received from such benefits with the taxpayer’s “base amount.” Base Amount is calculated by adding the following:

One-half of the amounts of all Forms SSA-1099 and RRB-1099, including the full amount of any lump-sum benefit payments received in the tax year for which the return is being filed and for any earlier years;
Total amount of taxable pensions, wages, interest, dividends, and other taxable income; and
Any tax-exempt interest income (such as interest on municipal bonds) in addition to any exclusions from income.

(Refer to Internal Revenue Service’s Social Security and Equivalent Railroad Retirement Benefits Form 915.)

Once the base amount is calculated the taxpayer must compare the base amount with the applicable amount stated below as applies to the taxpayer’s filing status for that tax year:

$25,000 if single, the head of household, or a qualifying widow(er) widower.
$25,000 if married filing separately and did not live with spouse at any time during the tax year.
$32,000 if married filing jointly.
$0 if married filing separately and lived with spouse at any time during the tax year.

Any amount that exceeds the base amount listed above, which is applicable to the taxpayer, will be taxable by the Internal Revenue Service (IRS). Note, although a taxpayer’s social security benefits may not be taxable, the taxpayer may still be required to file a federal tax return where the taxpayer has other income in addition to such benefits.

Furthermore, where a taxpayer repays private disability payments from an insurance company or employer through SSA lump sum payments an itemized deduction for the amount may be deducted as long as the repayment did not exceed $3,000. If, however, the repayment exceeds $3,000 the taxpayer is not at a loss, a tax credit may be claimed rather than an itemized deduction.

In addition, legal expenses incurred in connection with the, collection, determination, or refund of any tax as well as other tax-related circumstances may be deductible. Refer to the Internal Revenue Code for further information regarding legal expenses.

 

Segal, Cohen & Landis
9100 Wilshire Blvd. Ste. 601E
Beverly Hills, CA 90212
(310) 285-3999

Leave a Comment