Intuit Academy Tax Practice Exam 2025 – Full Preparation Guide

The taxability of Social Security benefits is determined by combined income, which includes the individual's adjusted gross income, any tax-exempt interest, and half of the Social Security benefits received. There are specific thresholds set by the IRS that, when exceeded, result in a portion of Social Security benefits becoming taxable.

For single filers, if combined income exceeds $25,000, a portion of the benefits may be taxable. For married couples filing jointly, the threshold is $32,000. If combined income exceeds $34,000 for single filers or $44,000 for married couples filing jointly, a higher portion of the benefits may be subject to taxation. This demonstrates how the specific financial benchmarks defined by the IRS play a crucial role in determining the extent to which Social Security benefits are taxable, making the statement about income thresholds crucial for understanding the tax implications of these benefits.