Frequently Asked Questions
Who is eligible for the Lump-Sum Social Security Benefit Election?
Taxpayers who receive a lump-sum Social Security payment that includes benefits attributable to one or more prior taxable years.
How does the Lump-Sum Social Security Benefit Election work?
Allows taxpayers receiving a lump-sum payment for prior years to elect to calculate the taxable portion as if it were received in those prior years, preventing a tax bracket spike.
What law authorizes the Lump-Sum Social Security Benefit Election?
The Lump-Sum Social Security Benefit Election is authorized under IRC §86(e) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §86
Source: Internal Revenue Code, Title 26, United States Code
§ 86. Social security and tier 1 railroad retirement benefits(a) In general(1) In generalExcept as provided in paragraph (2), gross income for the taxable year of any taxpayer described in subsection (b) (notwithstanding section 207 of the Social Security Act) includes social security benefits in an amount equal to the lesser of—(A) one-half of the social security benefits received during the taxable year, or
(B) one-half of the excess described in subsection (b)(1).
(2) Additional amountIn the case of a taxpayer with respect to whom the amount determined under subsection (b)(1)(A) exceeds the adjusted base amount, the amount included in gross income under this section shall be equal to the lesser of—(A) the sum of—(i) 85 percent of such excess, plus
(ii) the lesser of the amount determined under paragraph (1) or an amount equal to one-half of the difference between the adjusted base amount and the base amount of the taxpayer, or
(B) 85 percent of the social security benefits received during the taxable year.
(b) Taxpayers to whom subsection (a) applies(1) In generalA taxpayer is described in this subsection if—(A) the sum of—(i) the modified adjusted gross income of the taxpayer for the taxable year, plus
(ii) one-half of the social security benefits received during the taxable year, exceeds
(B) the base amount.
(2) Modified adjusted gross incomeFor purposes of this subsection, the term “modified adjusted gross income” means adjusted gross income—(A) determined without regard to this section and sections 85(c), 135, 137, 221, 911, 931, and 933, and
(B) increased by the amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.
(c) Base amount and adjusted base amountFor purposes of this section—(1) Base amountThe term “base amount” means—(A) except as otherwise provided in this paragraph, $25,000,
(B) $32,000 in the case of a joint return, and
(C) zero in the case of a taxpayer who—(i) is married as of the close of the taxable year (within the meaning of section 7703) but does not file a joint return for such year, and
(ii) does not live apart from his spouse at all times during the taxable year.
(2) Adjusted base amountThe term “adjusted base amount” means—(A) except as otherwise provided in this paragraph, $34,000,
(B) $44,000 in the case of a joint return, and
(C) zero in the case of a taxpayer described in paragraph (1)(C).
(d) Social security benefit(1) In generalFor purposes of this section, the term “social security benefit” means any amount received by the taxpayer by reason of entitlement to—(A) a monthly benefit under title II of the Social Security Act, or
(B) a tier 1 railroad retirement benefit.
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