For calculating possible tax on SS benefits, do you take out the standard deduction and personal exemptions first, to lower AGI?

[signs-and-more-signs]

The goal is to arrive at a "combined income" to see if you exceed the $32K annual combined and expose 50% of the SS benefits to tax.

Example.

$20K — Business net income (after expenses)

$14K — wife's employment

$25K — my social security

$10K — her social security

AGI calculation:

$20K business + $14K employment, less $1,500 (1/2 of SS taxes paid) = $32.5K

If I can take the standard deduction and personal exemptions here ($24,850), it reduces my AGI to $7,650.

Half my social security added ($12.5K) plus 100% of her social security ($10K) totals $22.5K.

$7,650 + $22.5K = just over $30K and under the threshold of $32K.

So two questions...

1. Is this calculation correct or did I do it wrong?

2. Is her social security added to the calculation at 50%, like mine, or at 100%?

Thanks.

[VolvoGirl]

The personal exemptions and Standard Deduction do not reduce your AGI.  You AGI is one amount on 1040 line 37.  Then you subtract the Personal Exemptions and Standard Deduction (or Itemized Deductions) to get your Taxable Income.

[signs-and-more-signs]

Hi VolvoGirl...so you're saying that  — using the above numbers — my AGI would be $32.5K, then I add in 1/2 of my SS, which is $12.5K, plus my wife's SS, $10K, and our combined income is $55K?

If that's how the threshold for taxing SS is figured, there's no way we can avoid having to pay.

Thanks.

[VolvoGirl]

No.  It's more complicated.  That's only to figure out if any of your SS is taxable not the amount that is taxed.  See my other post down below.

[VolvoGirl]

And why are you only calculating 50% of your SS but 100% of hers?  There's no difference between yours and hers.

[VolvoGirl]

I'm thinking about it.......your AGI is 32,500 + 1/2 of your SS 12,500 + 1/2 of her SS 5,000 = 50,000
That is not the new AGI or the taxable amount of income.  That's just an intermediate calculation to determine how much of the SS is taxable.  I don't know how the exact percentage is figured.

[dmertz · Accepted solution]

You can use TaxCaster to determine your AGI:  https://turbotax.intuit.com/tax-tools/calculators/taxcaster/

Personal exemptions and the standard or itemized deductions do not change your AGI.

Using the information that you provided, a significant portion of your Social Security income is taxable.  Your non-Social Security income is at least $18,000 over the amount where your $35,000 of Social Security income begins to become taxable (assuming no above-the-line deductions other than the deduction for ½ of self-employment taxes).

[dmertz]

Note that, due to the multiplying effect of increasing the amount your taxable Social Security income, your marginal federal tax rate at this income level is 1.85 * 15% = 27.75%.  You would have to have at least $21,900 more or $18,400 less in non-Social Security income (or an increase of $18,400 in above-the-line deductions) to get back down to a 15% marginal tax rate.  (This calculation assumes that you both are age 65 or over.  If under, the 27.75% marginal tax rate bubble will shift a bit relative to your AGI.)

[xmasbaby0]

You enter your SSA1099 exactly as it appears and let TurboTax do all of the calculations for you.

 Go to Federal> Wages & Income>>Retirement Plans and Social Security to enter your SSA1099.

[signs-and-more-signs]

I don't have TurboTax yet, and just want to know if I understand the process correctly.

[VolvoGirl]

Up to 85% of Social Security becomes taxable when all your other income plus 1/2 your social security, reaches:
Married Filing Jointly: $32,000
Single or head of household: $25,000
Married Filing Separately: 0

And.......You should not use the worksheet on the back of the SSA-1099. It can be complicated to figure out even though it looks simple. Turbo Tax figures it all out for you.  When you enter 1/2 of your ss on line B it is not being subtracted from anything.  It is being ADDED to ALL your other income to see if any of the ss will be taxable to you.

[Scline756]

If I am on s disability and my wife takes s at 62 is ther a tax on a total income of 37878

[xmasbaby0]

@Scline756 If the two of you have ONLY Social Security as your income, you do not even have to file a federal tax return unless you have a 1095A for marketplace health insurance.  It is not clear from your question whether you have any other income besides the Social Security disability and regular Social Security benefits, though.