Bruce receives Social Security benefits of $12,340, taxable interest of $8,320, wages from a part-time job of $6,250, and tax-exempt interest of $200. What is Bruce”s income for purposes of figuring the taxable portion of Social Security benefits?
a. Incorrect. Tax-exempt interest cannot be excluded from income for purposes of calculating the taxable portion of Social Security benefits, so $20,740 (which is one-half of benefits, plus part-time wages and taxable interest) is not correct.
b. Correct. Income for purposes of figuring the taxable portion of Social Security benefits is one-half of benefits ($12,340 × 50%), plus part-time wages, plus taxable and tax-exempt interest, or $20,940.
c. Incorrect. Tax-exempt interest is not excludable for purposes of figuring the taxable portion of benefits, so $26,910 (which excludes the interest as well as including 100% of benefits) is not correct.
d. Incorrect. Income for purposes of figuring the taxable portion of Social Security benefits does not include all of the benefits, so $27,110 (which is 100% of the benefits, plus part-time wages, taxable interest, and tax-exempt interest) is not correct.
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