Does Social Security count?

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Does Social Security count?

Postby fredd » Sun Feb 17, 2013 11:42 am

I know of a couple in which the wife works and contributes to a 401K, while the husband age 67 collects SS. Does his SS count in determining their MAGI? She contributes the max $22,500 to the 401K, and if their MAGI is under $92,000 for 2012 then they can both make fully deductible IRA contributions.

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Re: Does Social Security count?

Postby gvsucavie03 » Sun Feb 17, 2013 11:49 am

Yes, form 1040 requires you to show SS benefits (taxable and non-taxable amounts) on the income portion from page 1 (line 20a and b). This would therefore factor into the MAGI.
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Re: Does Social Security count?

Postby HueyLD » Sun Feb 17, 2013 11:54 am

If your couple friends want to understand how his social security benefit is taxed, they should fill out this worksheet by hand.
http://apps.irs.gov/app/vita/content/gl ... _1040i.pdf
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Re: Does Social Security count?

Postby Alan S. » Sun Feb 17, 2013 1:16 pm

Things get very complicated here IF the husband wants to make a deductible spousal contribution from wife's income, since he is also receiving SS benefits.

This triggers Appendix B worksheets in Pub 590, all 3 of them. Basically, since modified AGI is determined by and ALSO effects both the TIRA deduction and taxable SS benefits, the worksheets use an articial MAGI calculation (WS 1), use that MAGI to determine how much of the TIRA contribution can be deducted (WS 2), and then use that TIRA deduction to determine MAGI for SS benefit taxation (WS 3). WS 3 replaces the usual SS taxation worksheet normally used.

If WS 2 limits the deduction, the non deductible portion should either not be made OR should be made as a Roth contribution instead.
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