Answer:
In order to determine the amount of social security benefits that is taxable to Carl and Karina, we need to consider their total income and compare it to the base amount set by the IRS.
Let's break down their income sources:
Karina's income: - Salary: $41,500
- Dividends: $3,280
- Taxable interest income: $2,140 - Nontaxable interest: $1,070
Carl's income:
- Social security benefits: $9,560
- Gift from his brother: $6,140
First, we need to calculate their total income. For Karina, the total income is the sum of her salary, dividends, taxable interest income, and nontaxable interest: $41,500+ $3,280 + $2,140 + $1,070 = $48,990
For Carl, the total income is the sum of his social security benefits and the gift from his brother:
$9,560 +$6,140 = $15,700
Next, we need to compare their totalincome to the base amount set by the IRS. For the tax year 2021, the base amount for married couples filing a joint return is $32,000.
If their total income is below the base amount, none of their social security benefits are taxable. However, if their total income exceeds the base amount, a portion of their social security benefits may be taxable.
To determine the taxable amount, we use the IRS formula, which includes adding half of the social security benefits to the total income. If the result exceeds the base amount, then a portion of the benefits is taxable.
In this case, their total income is $48,990 + $15,700 $64,690. Since this amount is above the base amount of $32,000, we need to calculate the taxable amount.
Step-by-step explanation:
Step 1: Add half of the social security benefits to the total income: $64,690 + ($9,560 / 2) = $69,470
Step 2: Subtract the base amount from the
result: $69,470 - $32,000 = $37,470
The taxable amount of their social security
benefits is $37,470.
To summarize, the amount of social security benefits that is taxable to Carl and Karina is $37,470.