Fact Sheet: Taxation of Social Security Benefits
(2000 tax returns, only)
Up to 85% of Social Security retirement benefits are taxed by the IRS depending upon the taxpayer’s income and filing status. The state of California does not tax Social Security retirement benefits. Therefore, if the taxpayer owes taxes on his of her federal tax return for Social Security retirement benefits, then an appropriate adjustment must be made on the California return to reduce gross income. If a taxpayer owes any tax on Social Security retirement benefits, then a 1040A or 1040 must be filed. The taxpayer may not file a 1040EZ. If no benefits are taxable, they are not entered on a tax return, and a 1040EZ, if otherwise available, may be filed.
Social Security benefits are reported to the taxpayer in box 5 of a Form SSA—1099, or a Form RRB—1099. Report the net benefits on l040A, line 20a, and the taxable portion on line 20b (for MFS taxpayers, who lived apart from his/her spouse for all of 2000, enter a “D” to the left of line 20a. Report the net benefits on 1040, line 14a, and the taxable portion on line 14b. For MFS taxpayers, who lived apart from his/her spouse for all of 2000Put a “D” to the right of the word “benefits” on line 14a.
In most cases, for 2000, up to 50% of Social Security retirement benefits begin to become subject to taxation when the taxpayer’s MAGI plus half the taxpayer’s benefits exceed the following:
1. MFJ: 34,000.00 to $44,000.00 (over $44,000.00, up to 85% of social security benefits are taxed)
2. S, HH, QW, or MFS (and the taxpayer didn’t live with his or her spouse at any time during the year): $25,000.00 to $34,000.00 (over $34,000.00 up to 85% of social security benefits are taxed).
MAGI for taxation of social security benefits is AGI (excluding social security benefits) plus excluded employer provided adoption benefits, tax-exempt interest (e.g., municipal bond interest income), excluded U.S. Savings Bond interest (e.g., due to qualified educational expenses), excluded foreign earned income or housing, and U.S. possession income, and student loan interest deduction.
Calculation of Taxable Social Security Benefits
(2000 tax returns, only. From 1040 instruction book, p. 26)
If any portion of Social Security benefits are taxable, a 1040EZ may not be filed. A 1040A or a 1040 must be filed.
No (STOP). No portion of benefits are taxable.
Yes (enter ½ of the amount on 1, above):
(A) 1040 filers: Add the amounts from: lines 7 (W-2 wages, salaries,
tips, etc), 8a (taxable interest), 9 (ordinary dividends)
10 (taxable refunds, credits, etc.), 11 (alimony (spousal support)),
12 (business income or loss), 13 (capital gain or loss),
14 (other gain or loss), 15b (taxable IRA distributions), 16b (taxable
pensions and annuities, 17 (rental real estate, royalties, partnerships,
S corporations, trusts, etc., 18 (Farm income/loss), 19 (Unemployment
compensation), and 21 (other income) (Don’t include the amounts from
box 5 of SSA—1099, or RRB—1099).
(B) 1040A filers: Add the amounts from: lines 7 (W-2 wages, salaries,
tips, etc), 8a (taxable interest), 9 (ordinary dividends), 10 (capital gain
distributions, 11b (taxable IRA distributions), 12b (taxable pensions,
annuities, etc.), and 13 (unemployment compensation, qualified
state tuition program earnings, and Alaska Permanent Fund dividends
(Don’t include the amounts from box 5 of SSA—1099,
(A)1040 filers: Add the amounts from: lines 23 (IRA deduction), 24
(student loan interest deduction), 25 (medical savings account deduction),
31a (alimony/spousal support paid) and any amount written on the dotted
line next to 32 (other adjustments to income (see instructions, p. 32)
(B)1040A filers: Enter the amount from: line 16 (IRA deduction)
spouse for all of 2000); $32,000 if MFJ; $0 if MFS and taxpayer lived
with his/her spouse for any time in 2000
No: STOP. None of the taxpayer’s benefits are taxable.
Taxpayer does not have to enter any amount on 14a or 14b (Form 1040A);
20a, or 20b (Form 1040), BUT, if the taxpayer is filing as MFS, and
lived apart from his/her spouse for all of 2000, enter 0 on line14b (1040A),
or line 20b (1040). Be sure to enter a “D” to the right of the word “benefits”
on line 14a (1040A), or 20a (1040).
Yes: Subtract 8 from 7 (amount by which MGI exceeds the
spouse throughout ALL of 2000); $12,000 (MFJ); $0 (if MFS and taxpayer
lived with his/her spouse for any portion of 2000)
* Enter the amount form 1 on line 14a (Form1040A), or 20a (Form 1040);
* Enter the amount from 18 on line 14b (Form 1040A), or 20b (Form 1040)