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Much Is Taxable?
If part of your benefits are taxable, how much is taxable depends on the total amount
of your benefits and other income. Generally, the higher that total amount, the greater
the taxable part of your benefits.
Maximum taxable part. Generally, up to 50% of your benefits will be taxable.
However, up to 85% of your benefits can be taxable if either of the following situations
applies to you.
- The total of one-half of your benefits and all your other income is more than $34,000
($44,000 if you are married filing jointly).
- You are married filing separately and lived with your spouse at any time
during 2001.
Which worksheet to use. A worksheet to figure your taxable benefits is in the
instructions for your Form 1040 or 1040A. You can use either that worksheet or Worksheet
1 in this publication, unless any of the following situations applies to you.
- You contributed to a traditional individual retirement arrangement (IRA) and your IRA
deduction is limited because you or your spouse is covered by a retirement plan at work.
In this situation you must use the special worksheets in Appendix B
of Publication 590 to figure both your IRA deduction and your
taxable benefits.
- Situation (1) does not apply and you take an exclusion for interest from qualified U.S.
savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or
housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or
Puerto Rico by bona fide residents. In this situation, you must use Worksheet
1 in this publication to figure your taxable benefits.
- You received a lump-sum payment for an earlier year. In this situation, also complete Worksheet
2 or 3 and Worksheet 4 in this publication. See Lump-Sum Election, later.
Examples
The following pages contain a few examples you can use as a guide to figure the taxable
part of your benefits.
Taxable benefits computation for George White
Taxable benefits computation for Hopkins
Taxable benefits computation for Johnson
Taxable benefits computation for Jones |
