question - does AGI include social security

[joesxm3]

I have been doing Google but I get confused, so I am asking.

Is this correct?

Gross Income does not include social security payments.

Adjusted Gross Income does not include social security payments.

Combined income includes 1/2 of social security payments.

Modified Adjusted Gross Income includes "the taxable portion of social security payments".

Thanks.

 

[cathy63]

I have been doing Google but I get confused, so I am asking.

Is this correct?

Gross Income does not include social security payments.

Adjusted Gross Income does not include social security payments.

Combined income includes 1/2 of social security payments.

Modified Adjusted Gross Income includes "the taxable portion of social security payments".

Thanks.

Gross Income is defined in the tax code and the inclusion of SS is defined here: https://www.law.cornell.edu/uscode/text/26/86

Basically the answer is that Gross Income and Adjusted Gross Income both include some of your social security.

I don't think the IRS defines "combined income", but I could be wrong about that.

Modified Adjusted Gross Income has several different meanings within the tax code, so you have to say in what context you're asking. At least in some cases, such as for premium tax credits, it includes all SS, even the non-taxable part.

 

[SecondCor521]

I have been doing Google but I get confused, so I am asking.

Is this correct?

Gross Income does not include social security payments.

Adjusted Gross Income does not include social security payments.

Combined income includes 1/2 of social security payments.

Modified Adjusted Gross Income includes "the taxable portion of social security payments".

Thanks.

I like and agree with @cathy63's answer above.

Social Security payments are on line 6a of a 2022 Form 1040 tax return.

The taxable portion of Social Security payments are on line 6b of the tax return, where the taxable portion of SS gets included into your total income.

Total income minus adjustments becomes AGI. MAGI is always starts with AGI but gets adjusted in different ways for different reasons, as @cathy63 notes above.

I think when you say combined income, you're referring to what I have heard the IRS call "provisional income", which is half your total SS benefits plus all of your other income plus tax exempt interest.

Provisional income is near the top of the SS benefits worksheet (at page 32 of the Form 1040 instructions at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf). This worksheet is used to calculate the part of your SS benefits are taxable. Notice that the result from line 18 at the bottom goes to box 6b.

 

[joesxm3]

Thanks.

I should have just liked at the foms instead of Google articles.

My state is going to stop taxing IRA distributions but only if AGI is less than $70,000. So I was wondering if this would affect Roth conversion strategy.

My SS will be at around $50,000 and my RMD based on current account value will start at $20,000 and quickly jump to $25,000. So, "up to 85% of SS" seems like $40,000 which would put AGI near 60,000 without any other stuff. That is uncomfortab!y close to $70,000 and IRA being taxed.

I will have to check the worksheet or model with Turbo Tax, but it seems like trying to do another three years of conversions before I turn 70 still makes sense. Up to top of 12% won't reduce RMD that much, but every little bit helps and I might still be able to take a little out without state tax before RMD starts.

 

[cathy63]

... My state is going to stop taxing IRA distributions but only if AGI is less than $70,000. So I was wondering if this would affect Roth conversion strategy...

Ahh, that is a different question! I assumed you were asking about Federal AGI, but if a state is thinking about taxation they are probably basing the rules on their own AGI calculation, so you need to look at your state's tax forms to see how this would affect you.

In my state Social Security is not taxable, so none of it is included in the state AGI.

 

[joesxm3]

Oh. Good point. I assumed they meant federal agi.
I think my head will pop. Worrying about this then Tesla comes out with a 30% price drop on model Y so I need to freak out over replacing my 20 year old Acura. The sales tax, insurance and property tax on the Tesla is equal to three years of patching together my old car.

 

[joesxm3]

I checked the 2022 forms since the IRA does not start until 2023. They say that SS is not taxed if federal agi is less than $75,000 so I am guessing that the IRA $75,000 agi will be federal as well.

 

[jebmke]

Oh. Good point. I assumed they meant federal agi.
I think my head will pop. Worrying about this then Tesla comes out with a 30% price drop on model Y so I need to freak out over replacing my 20 year old Acura. The sales tax, insurance and property tax on the Tesla is equal to three years of patching together my old car.

I wouldn't assume that they are referring to Federal AGI; worth checking state instructions.

As a general rule, I don't rely on any tax information on the internet or from organizations (e.g. banks!) that are not the official taxing authority. I don't currently use an accountant to do my taxes but for a few years, I did but I didn't rely on them either.

 

[SecondCor521]

I checked the 2022 forms since the IRA does not start until 2023. They say that SS is not taxed if federal agi is less than $75,000 so I am guessing that the IRA $75,000 agi will be federal as well.

If you want to dive into it, you can probably find the text of the state law change in your state and know for sure. In my state they're highly readable and understandable with a bit of practice, but this differs from state to state I think.