Life · Chapter 12 · Characteristics & Funding
Taxation of Social Security Benefits
Definition
Benefits become partly subject to federal income tax when combined income — AGI + tax-exempt interest + half of benefits — exceeds $25,000 (single) or $32,000 (joint). Regardless of income, at least 15% of benefits is always income-tax free — no more than 85% can ever be taxed.
Exam tip
The oddly specific '15% always tax-free' line is the tested fact. And it's COMBINED income (AGI + tax-exempt interest + ½ of benefits), not plain AGI.
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