Tax Free Interest and Dividends Taxed Due to Calculation of Taxable Amount of SS Benefits


A

askalot

Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?

Doesn't this, in effect, Tax the Tax-Free Income?

Where in the Tax Code is this allowed?

Thanks for any help or explainaton.
 
Last edited by a moderator:
Ad

Advertisements

S

Shyster1040

As to tax-exempt interest, see Code Section 86(b)(2)(B). As
to dividends, what dividends have you received that are
tax-exempt?

As far as this effectively taxing otherwise tax-exempt
income - yes, obviously, but so what? The exemption from
tax was a gift from Congress in the first place, and what
Congress giveth, Congress can take awayeth.
 
Last edited by a moderator:
A

A.G. Kalman

askalot said:
Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?

Doesn't this, in effect, Tax the Tax-Free Income?

Where in the Tax Code is this allowed?
Sec. 86(b)(2)(B). I'm almost sure it was enacted in PL 98-21
(HR 1900) signed by President Ronald Reagan.
 
Last edited by a moderator:
P

Phil Marti

askalot said:
Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?
To get more revenue.
Doesn't this, in effect, Tax the Tax-Free Income?
That's certainly one way to look at it.
Where in the Tax Code is this allowed?
Internal Revenue Code section 86.
 
Last edited by a moderator:
B

Benjamin Yazersky CPA

askalot said:
Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?

Doesn't this, in effect, Tax the Tax-Free Income?

Where in the Tax Code is this allowed?

Thanks for any help or explainaton.
its how congress taxes your tax exempt income
(don't ask me-I don't write the tax laws)

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----
 
Last edited by a moderator:
R

Rich Carreiro

askalot said:
Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?
Because that's how Congress wrote the law. If you want
to know why, ask them.
Doesn't this, in effect, Tax the Tax-Free Income?
In a sense, yes. But since you have no right to
tax-free income, it doesn't really matter.
Where in the Tax Code is this allowed?
26 USC 86(a) et seq.
 
Last edited by a moderator:
Ad

Advertisements

B

Bill Brown

askalot said:
Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?
Because Congress said so. They may have said so because
their intent was to increase taxes for wealthy people who
are collecting SSI when they don't really need it. Only the
financially well off get enough of a tax benefit to make it
worthwhile to make significant investments in tax exempt
bonds. Therefore, tax exempt interest is included in the
computation of taxable SSI. Or something else.
Doesn't this, in effect, Tax the Tax-Free Income?
In effect, yes.
Where in the Tax Code is this allowed?
Sorry but I'm not looking it up. Trust me, though, it is in
the Code.
 
Last edited by a moderator:
T

Taxxcpa

askalot said:
Why are Tax Free Interest and Dividends included in the
income used to determine the Taxable Amount of Social
Security Benefits?

Doesn't this, in effect, Tax the Tax-Free Income?

Where in the Tax Code is this allowed?
Tax free interest is reported, but not taxed per se.
However, it is a sneaky way to tax social security. It is
added to other income in determining if you made enough to
cause your social security to be taxed. Tax exempt interest
from private activity bonds also must be added to income for
Alternate Minimum tax purposes. See my blog on taxes at
http://wwwtaxman.blogspot.com
 
Last edited by a moderator:
Ad

Advertisements

H

Herb Smith

Shyster1040 said:
As to tax-exempt interest, see Code Section 86(b)(2)(B). As
to dividends, what dividends have you received that are
tax-exempt?
Tax Exempt Municipal Bond Funds?
 
Last edited by a moderator:

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top