For the 2010 tax year, Kim and Edward are married and file a joint return. They have Social Security benefits of $13,000 and their adjusted gross income is

$20,000, not including any Social Security income. They also receive $30,000 in tax-free municipal bond interest. How much, if any, of the Social Security benefits should Kim and Edward include in gross income? Use the worksheet below to compute your answer.

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$ Simplified Taxable Social Security Worksheet (for most people) 1. Enter the total amount of Social Security income. 2. Enter one-half of line 1. 3. Enter the total of taxable income items on Form 1040 except Social Security income. 4. Enter the amount of tax-exempt interest income. 5. Add lines 2, 3, and 4. 6. Enter all adjustments for AGI except for student loan inter- est, the domestic production activities deduction, and the tuition and fees deduction. 7. Subtract line 6 from line 5. If zero or less, stop here, none of the Social Security benefits are taxable. 1. 2. 3. 4. 5. 6. 7. 8. Enter $25,000 ($32,000 if married filing jointly; $0 if married 8. filing separately and living with spouse at any time during the year). 9. Subtract line 8 from line 7. If zero or less, enter -0-. Note: If line 9 is zero or less, stop here; none of your benefits are taxable. Otherwise, go on to line 10. 9. 10. Enter $9,000 ($12,000 if married filing jointly; $0 if married 10. filing separately and living with spouse at any time during the year). 11. Subtract line 10 from line 9. If zero or less, enter -0- 12. Enter the smaller of line 9 or line 10. 13. Enter one-half of line 12. 14. Enter the smaller of line 2 or line 13. 15. Multiply line 11 by 85% (85). If line 11 is zero, enter -0. 16. Add lines 14 and 15. 17. Multiply line 1 by 85% (.85). 18. Taxable benefits. Enter the smaller of line 16 or line 17. 11. 12. 13. 14. 15. 16. 17. 18.