CPA Tom Walpole discussed Social Security recipients and marriage Monday on News 8 at Sunrise.

The topic was inspired by a viewer question which asked how much is taxed when it comes to Social Security recipients and marriage.  “The answer is, it depends,” said Walpole.  “It’s never easy with the government. You start out with a number called MAGI, which is an acronym for Modified Adjusted Gross Income. You take your adjusted gross income, and from that, you add any tax exempt interest that you might have. Then from there, you get to the provisional income, and to do that, you have to add one half of your Social Security. So now you’ve got your MAGI, and half of your Social Security to give you the provisional income, and from there you subtract the base amount. The base amount is going to depend on whether you are married or single.”

 Walpole said if you’re single, the base amount is $25,000. If you’re married, it’s $32,000, so if you’re a married couple it’s going to bring you down a little more non-taxable income.  “Then from there, you look at the excess over the base, which is what’s left over,” he said. “You then take half that number, compare it to one half of the Society Security that you’ve received, and the lesser amount is added back to become taxable income. It’s as simple as can be!”
To clarify how this works, Walpole offered an example.  “Let’s say we’ve got a married couple, we’ll call them Donald and Hillary,” he said.  “They have an adjusted gross income of $23,000. Municipal income bonds pay them $7,000 of tax-free income. Donald is retired and receives $7,600 in Social Security benefits.  Now we take the adjusted gross income of $23,000, add in the tax-exempt interest of $7,000 to get a MAGI of $30,000. From that MAGI, we subtract Social Security of $3,800 and that brings us to the provisional income amount of $33,800. Now since they’re married, we subtract the base amount of $32,000 and that’s going to give them the excess of our base of $1,800. One half of that number is $900. One half of Donald’s Social Security is $3,800, so the less amount of $900 is added to their income.”
Walpole said the calculations will vary from person to person.  “It’s not the same answer for everybody,” he said.  “If you’re a married couple and one person does not earn any money at all, that person could become your tax shelter.”  He added, ” It’s all income. If you’ve got rental income, a small business or investments, they all contribute to the MAGI as well. It’s all your income, not just earrings.”
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