Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers.  Here’s the question of the day.

Question: My client and her minor children are receiving Social Security survivors’ benefits.  If my client has taxable income this year, will it make the survivors’ benefits taxable?

Answer: Yes, possibly.  Up to 85% of survivors’ benefits, like Social Security retirement benefits, are potentially income taxable.

If kids are entitled to survivors’ benefits under Social Security, the income is considered to be theirs.  Any tax result on the benefits will depend on their own other taxable income.  For most minor children, that means their survivor’s benefit will be tax free.

Likewise, a surviving spouse’s benefit under Social Security is potentially taxable depending on her own other taxable income.  If an unmarried surviving spouse adds up half her Social Security benefit plus other taxable income, if the result is greater than $25,000, then at least part of the survivor’s benefit will probably be income taxable.

IRS Publication 915 gives a worksheet to calculate how much of the benefit is taxable.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.