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
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