34.3 Computing Taxable Social Security Benefits

The taxable portion of your 2012 benefits depends on your provisional income and your filing status. Part of your net Social Security benefits (Box 5 of Form SSA-1099) will be subject to tax if your provisional income exceeds a base amount of $25,000 or $32,000. The base amount is $25,000 if your filing status is single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2012. The base amount is $32,000 if you are married filing jointly. You are not entitled to any base amount if you are married filing separately and you lived with your spouse at any time during 2012; see the Caution in this section.

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image Caution
Married Filing Separately
If you are married filing separately and during 2012 you lived with your spouse at any time, you must include in your taxable income the lesser of (1) 85% of your net Social Security benefits shown on Line 1 of Worksheet 34-1 or (2) 85% of the provisional income shown on Line 8 of Worksheet 34-1.
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To figure provisional income, you will have to increase the total income shown on your return by tax-exempt interest (4.24), by 50% of your net Social Security benefits, and by certain tax-free fringe benefits and exclusions, before subtracting adjustments to income other than the student loan interest deduction (33.13), the tuition and fees deduction (33.12), and the domestic production activities deduction (40.23). By completing Lines 1–8 of Worksheet 34-1, you arrive at provisional income, shown on Line 8.

EXAMPLES
1. Frank Adams, who is single, has 2012 earnings of $16,000 from a part-time job, $500 of interest income, and $700 of dividends. He also receives $10,800 of net Social Security benefits (Box 5 of Form SSA-1099). Completing Worksheet 34-1, Frank’s provisional income on Line 8 is $22,600 ($16,000 + 500 + 700 + 5,400 (50% of the $10,800 net Social Security benefits). Since $22,600 does not exceed the $25,000 base amount on Line 9 of the worksheet, none of Frank’s Social Security benefits are taxable.
2. Sam and Fran Baker receive in 2012 net Social Security benefits (Box 5 of Form SSA-1099) of $19,000. Their taxable interest, dividends, and capital gains are $20,000, and tax-exempt interest is $8,000. They file a joint return. Their provisional income from Line 8 of Worksheet 34-1 is $37,500 ($20,000 + 8,000 + 50% of the $19,000 net Social Security benefits). Since $37,500 exceeds the $32,000 base amount on Line 9 of the worksheet, part of their Social Security benefits will be taxed. By completing the rest of Worksheet 34-1, Sam and Fran figure that $2,750 of their benefits are subject to tax.

IRA contributions.

Do not use Worksheet 34-1 if you are an active participant in an employer retirement plan and you plan to make deductible IRA contributions (8.4). You must use the worksheets printed in IRS Publication 590. With the worksheets, you first determine the amount of Social Security benefits that would be subject to tax, assuming you did not claim any IRA deduction. That amount is then used to figure the allowable IRA deduction, taking into account any limitations under the phase-out rules (8.4), and, finally, the allowable IRA deduction is used to compute the taxable portion of your Social Security benefits.

If you are not covered by an employer retirement plan, you may use the worksheet to figure the taxable portion of your Social Security benefits.

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