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Capital gains effect on taxable Social Sec.
Old 02-26-2017, 07:53 AM   #1
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Capital gains effect on taxable Social Sec.

I keep a spreadsheet for income tax planning and am having trouble getting one thing straight.

Example: Taxpayer, married filing jointly, has 30k in income from retirement plan distributions, interest, and dividends. Plus 25k in social security. About 4k of the social security is taxable.

If taxpayer realizes a 20k capital gain it is taxed at 0% as they are below the ceiling of the 15% tax bracket.

Question: will realizing the gain increase the amount of the social security benefit subject to taxation?
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Old 02-26-2017, 08:50 AM   #2
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https://apps.irs.gov/app/vita/conten...heet_1040i.pdf

yes. You could program the wksht into your spreadsheet.
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Old 02-26-2017, 08:57 AM   #3
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Yes, because SS taxation is subject to your MAGI - modified adjusted gross income that includes your AGI as well as otherwise tax exempt income such as muni bond income.

The fact that your LT cap gains income is tax free under your scenario has no bearing.
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Old 02-26-2017, 08:59 AM   #4
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Face this myself, but manipulating income for ACA subsidy which (for now) saves us from taxes on SS income. The tax man is patient though...

Investment income will increase your adjusted gross income (AGI), which can make more of your SS benefit taxable, resulting in less after-tax SS benefits.

https://www.nerdwallet.com/ask/quest...receives-26812

This link gives a good explanation.

https://thefinancebuff.com/tax-on-ca...-benefits.html
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