For purposes of calculating "total income" to figure taxation of Social Security benefits (Line C, Notice 703), can I subtract a $3K capital loss against other income?

[xmasbaby0]

You just enter your SSA1099 EXACTLY as it appears and let the software do your calculations.   Your SSA1099 arrives in the mail in January.

TAX ON SOCIAL SECURITY

Up to 85% of your Social Security benefits can be taxable on your federal tax return.  There is no age limit for having to pay taxes on Social Security benefits if you have other sources of income along with the SS benefits.  When you have other income such as earnings from continuing to work, investment income, pensions, etc. up to 85% of your SS can be taxable.

 What confuses people about this is that before you reach full retirement age, if you continue working while drawing SS, your benefits can be reduced if you earn over a certain limit. (For 2017 that limit was $16,920 —for 2018 it will be $17,040—for 2019 it will be $17,640— for 2020 it will be $18,240)  After full retirement age, no matter how much you continue to earn, your benefits are not reduced by your earnings; your employer will still have to withhold for Social Security and Medicare.

To see how much of your Social Security was taxable, look at lines 6a and 6b of your 2020 Form 1040

https://ttlc.intuit.com/questions/1899144-is-my-social-security-income-taxable

https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable

You need to file a federal return if half your Social Security plus your other income is $25,000 when filing single or head of household, or $32,000 when filing married filing jointly, $0 if you are filing married filing separately.

Some additional information:  There are 13 states that tax Social Security—Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.  These states offer varying degrees of income exemptions, but four mirror the federal tax schedule: MN, ND,VT, and WV

[SteamTrain · Accepted solution]

...exactly......let the software do the calculation, since there's a lot of "stuff" remaining to be accounted for.

BUT #`1...if you are playing with the Notice 703 on your own, then yes, any excess investment losses not yet accounted for, up to 3000 max,  can be subtracted from line C.

But #2..but ..but, this assumes you have any unused excess losses remaining to subtract.  i.e., you may have investment gains this year that will be used first to offset any losses you had this year ( or carried over from last year ).....your losses need to be subtracted from those gains first.  Particularly for year-end Mutual Fund distributions, I have at least one that doesn't report long-term gain distributions until 2 days before the end of the year.  Those all figure into line C too, so any guesstimates you make on your own now, using Notice 703, are just that, just crude guesstimates.

[Tax Amateur]

Thanks for your response, Steam Train. I am already using TT Premier 2020. However, since the IRS is still fiddling with Schedule D, the software won't provide the needed calculation "until next year".

The reason I need the answer now is that I am trying to determine how much I can pull from my (taxable) IRA this year without triggering taxation of the Social Security benefit, , and/or exceeding a marginal tax bracket.

Fortunately (?) I've got a good handle on my capital gains and losses, and I expect that I"ll be able to apply the max $3K against any planned IRA withdrawal.  Good to hear that it can offset other income.

Thanks again