Caroline, who files as head of household, received $9,000 of social security benefits. Her AGI before the social security benefits was $27,000. She also received $200 of tax- exempt interest. What is the amount of taxable social security benefits?
$9,000
$7,650
$4,500
$3,350
is it D
To determine the amount of taxable social security benefits, you can follow these steps:
1. Calculate Caroline's provisional income: Provisional income is calculated by taking Caroline's adjusted gross income (AGI) and adding tax-exempt interest and 50% of the social security benefits. In this case, her AGI is $27,000, tax-exempt interest is $200, and social security benefits are $9,000. So, provisional income = $27,000 + $200 + ($9,000 * 50%) = $27,000 + $200 + $4,500 = $31,700.
2. Determine the base amount for her filing status: The base amount is the threshold above which a portion of the social security benefits become taxable. For the head of household filing status, the base amount is $25,000.
3. Calculate the taxable portion of the social security benefits: If the provisional income exceeds the base amount, some portion of the social security benefits will be taxable. To find the taxable amount, subtract the base amount from the provisional income and divide half of the difference by 2. In this case, the calculation would be: ($31,700 - $25,000) / 2 = $6,700 / 2 = $3,350.
Therefore, the correct answer is option D: $3,350.