
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 431(c)(1)]
[CITE: 26USC86]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
          PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME
 
Sec. 86. Social security and tier 1 railroad retirement benefits


(a) In general

                           (1) In general

        Except 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 amount

        In 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 general

        A 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 income

        For purposes of this subsection, the term ``modified adjusted 
    gross income'' means adjusted gross income--
            (A) determined without regard to this section and sections 
        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 amount

    For purposes of this section--

                           (1) Base amount

        The 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 amount

        The 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 general

        For 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.

              (2) Adjustment for repayments during year

        (A) In general

            For purposes of this section, the amount of social security 
        benefits received during any taxable year shall be reduced by 
        any repayment made by the taxpayer during the taxable year of a 
        social security benefit previously received by the taxpayer 
        (whether or not such benefit was received during the taxable 
        year).

        (B) Denial of deduction

            If (but for this subparagraph) any portion of the repayments 
        referred to in subparagraph (A) would have been allowable as a 
        deduction for the taxable year under section 165, such portion 
        shall be allowable as a deduction only to the extent it exceeds 
        the social security benefits received by the taxpayer during the 
        taxable year (and not repaid during such taxable year).

     (3) Workmen's compensation benefits substituted for social 
                              security benefits

        For purposes of this section, if, by reason of section 224 of 
    the Social Security Act (or by reason of section 3(a)(1) of the 
    Railroad Retirement Act of 1974), any social security benefit is 
    reduced by reason of the receipt of a benefit under a workmen's 
    compensation act, the term ``social security benefit'' includes that 
    portion of such benefit received under the workmen's compensation 
    act which equals such reduction.

               (4) Tier 1 railroad retirement benefit

        For purposes of paragraph (1), the term ``tier 1 railroad 
    retirement benefit'' means--
            (A) the amount of the annuity under the Railroad Retirement 
        Act of 1974 equal to the amount of the benefit to which the 
        taxpayer would have been entitled under the Social Security Act 
        if all of the service after December 31, 1936, of the employee 
        (on whose employment record the annuity is being paid) had been 
        included in the term ``employment'' as defined in the Social 
        Security Act, and
            (B) a monthly annuity amount under section 3(f)(3) of the 
        Railroad Retirement Act of 1974.

           (5) Effect of early delivery of benefit checks

        For purposes of subsection (a), in any case where section 708 of 
    the Social Security Act causes social security benefit checks to be 
    delivered before the end of the calendar month for which they are 
    issued, the benefits involved shall be deemed to have been received 
    in the succeeding calendar month.

(e) Limitation on amount included where taxpayer receives lump-sum 
        payment

                           (1) Limitation

        If--
            (A) any portion of a lump-sum payment of social security 
        benefits received during the taxable year is attributable to 
        prior taxable years, and
            (B) the taxpayer makes an election under this subsection for 
        the taxable year,

then the amount included in gross income under this section for the 
taxable year by reason of the receipt of such portion shall not exceed 
the sum of the increases in gross income under this chapter for prior 
taxable years which would result solely from taking into account such 
portion in the taxable years to which it is attributable.

                          (2) Special rules

        (A) Year to which benefit attributable

            For purposes of this subsection, a social security benefit 
        is attributable to a taxable year if the generally applicable 
        payment date for such benefit occurred during such taxable year.

        (B) Election

            An election under this subsection shall be made at such time 
        and in such manner as the Secretary shall by regulations 
        prescribe. Such election, once made, may be revoked only with 
        the consent of the Secretary.

(f) Treatment as pension or annuity for certain purposes

    For purposes of--
        (1) section 22(c)(3)(A) (relating to reduction for amounts 
    received as pension or annuity),
        (2) section 32(c)(2) (defining earned income),
        (3) section 219(f)(1) (defining compensation), and
        (4) section 911(b)(1) (defining foreign earned income),

any social security benefit shall be treated as an amount received as a 
pension or annuity.

(Added and amended Pub. L. 98-21, title I, Sec. 121(a), title III, 
Sec. 335(b)(2)(A), Apr. 20, 1983, 97 Stat. 80, 130; Pub. L. 98-76, title 
II, Sec. 224(d), Aug. 12, 1983, 97 Stat. 424; Pub. L. 98-369, div. A, 
title IV, Sec. 474(r)(2), div. B, title VI, Sec. 2661(o)(1), July 18, 
1984, 98 Stat. 839, 1158; Pub. L. 99-272, title XII, Sec. 12111(b), 
title XIII, Sec. 13204(a), Apr. 7, 1986, 100 Stat. 287, 313; Pub. L. 99-
514, title I, Sec. 131(b)(2), title XIII, Sec. 1301(j)(8), title XVIII, 
Sec. 1847(b)(2), Oct. 22, 1986, 100 Stat. 2113, 2658, 2856; Pub. L. 100-
647, title I, Sec. 1001(e), title VI, Sec. 6009(c)(1), Nov. 10, 1988, 
102 Stat. 3351, 3690; Pub. L. 103-66, title XIII, Sec. 13215(a), (b), 
Aug. 10, 1993, 107 Stat. 475, 476; Pub. L. 103-296, title III, 
Sec. 309(d), Aug. 15, 1994, 108 Stat. 1523; Pub. L. 104-188, title I, 
Secs. 1704(t)(3), 1807(c)(2), Aug. 20, 1996, 110 Stat. 1887, 1902; Pub. 
L. 105-277, div. J, title IV, Sec. 4003(a)(2)(B), Oct. 21, 1998, 112 
Stat. 2681-908.)

                       References in Text

    The Social Security Act, referred to in subsecs. (a)(1) and 
(d)(1)(A), (3), (4)(A), (5), is act Aug. 14, 1935, ch. 531, 49 Stat. 
620, as amended, which is classified generally to chapter 7 (Sec. 301 et 
seq.) of Title 42, The Public Health and Welfare. Title II of the Act is 
classified generally to subchapter II (Sec. 401 et seq.) of Title 42. 
Sections 207, 224, and 708 of the Act are classified to sections 407, 
424a, and 909 of Title 42, respectively. For complete classification of 
this Act to the Code, see section 1305 of Title 42 and Tables.
    The Railroad Retirement Act of 1974, referred to in subsec. (d)(3), 
(4), is act Aug. 29, 1935, ch. 812, as amended generally by Pub. L. 93-
445, title I, Sec. 101, Oct. 16, 1974, 88 Stat. 1305, which is 
classified generally to subchapter IV (Sec. 231 et seq.) of chapter 9 of 
Title 45, Railroads. Section 3(a)(1), (f)(3) of the Act is classified to 
section 231b(a)(1), (f)(3) of Title 45. For further details and complete 
classification of this Act to the Code, see Codification note set out 
preceding section 231 of Title 45, section 231t of Title 45, and Tables.


                            Prior Provisions

    A prior section 86 was renumbered section 87 of this title.


                               Amendments

    1998--Subsec. (b)(2)(A). Pub. L. 105-277 inserted ``221,'' after 
``137,''.
    1996--Subsec. (b)(2). Pub. L. 104-188, Sec. 1704(t)(3), substituted 
``means adjusted'' for ``means adusted'' in introductory provisions.
    Subsec. (b)(2)(A). Pub. L. 104-188, Sec. 1807(c)(2), inserted 
``137,'' before ``911''.
    1994--Subsec. (d)(1). Pub. L. 103-296 struck out at end ``For 
purposes of the preceding sentence, the amount received by any taxpayer 
shall be determined as if the Social Security Act did not contain 
section 203(i) thereof.''
    1993--Subsec. (a). Pub. L. 103-66, Sec. 13215(a), designated 
existing provisions as par. (1), inserted par. (1) heading, substituted 
``Except as provided in paragraph (2), gross'' for ``Gross'', 
redesignated former pars. (1) and (2) as subpars. (A) and (B), 
respectively, and added par. (2).
    Subsec. (c). Pub. L. 103-66, Sec. 13215(b), amended heading and text 
of subsec. (c) generally. Prior to amendment, text read as follows: 
``For purposes of this section, the term `base amount' means--
        ``(1) except as otherwise provided in this subsection, $25,000,
        ``(2) $32,000, in the case of a joint return, and
        ``(3) zero, in the case of a taxpayer who--
            ``(A) is married at the close of the taxable year (within 
        the meaning of section 7703) but does not file a joint return 
        for such year, and
            ``(B) does not live apart from his spouse at all times 
        during the taxable year.''
    1988--Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 6009(c)(1), inserted 
``135,'' before ``911''.
    Subsec. (f)(4), (5). Pub. L. 100-647, Sec. 1001(e), redesignated 
par. (5) as (4) and struck out former par. (4) which read as follows: 
``section 221(b)(2) (defining earned income), and''.
    1986--Subsec. (b)(2)(A). Pub. L. 99-514, Sec. 131(b)(2), substituted 
``sections'' for ``sections 221,''.
    Subsec. (c)(3)(A). Pub. L. 99-514, Sec. 1301(j)(8), substituted 
``section 7703'' for ``section 143''.
    Subsec. (d)(4). Pub. L. 99-272, Sec. 13204(a), in amending par. (4) 
generally, designated existing provisions as introductory clause of par. 
(4), struck out ``a monthly benefit under section 3(a), 3(f)(3), 4(a), 
or 4(f) of the Railroad Retirement Act of 1974'', and added cls. (A) and 
(B).
    Subsec. (d)(5). Pub. L. 99-272, Sec. 12111(b), added par. (5).
    Subsec. (f)(1). Pub. L. 99-514, Sec. 1847(b)(2), substituted 
``section 22(c)(3)(A)'' for ``section 37(c)(3)(A)''.
    1984--Subsec. (f)(1). Pub. L. 98-369, Sec. 2661(o)(1), added par. 
(1). Former par. (1) redesignated par. (2).
    Pub. L. 98-369, Sec. 474(r)(2), substituted ``section 32(c)(2)'' for 
``section 43(c)(2)''.
    Subsec. (f)(2)-(5). Pub. L. 98-369, Sec. 2661(o)(1), redesignated 
pars. (1) to (4) as (2) to (5), respectively.
    1983--Subsec. (a). Pub. L. 98-21, Sec. 335(b)(2)(A), inserted 
``(notwithstanding section 207 of the Social Security Act)''.
    Subsec. (d)(4). Pub. L. 98-76 inserted ``3(f)(3),'' after ``3(a),''.


                    Effective Date of 1998 Amendment

    Pub. L. 105-277, div. J, title IV, Sec. 4003(l), Oct. 21, 1998, 112 
Stat. 2681-910, provided that: ``The amendments made by this section 
[amending this section and sections 135, 137, 163, 172, 219, 221, 264, 
351, 368, 469, 954, 2001, 6311, 6404, and 9510 of this title and 
amending provisions set out as a note under section 7508A of this title] 
shall take effect as if included in the provisions of the 1997 Act [Pub. 
L. 105-34] to which they relate.''


                    Effective Date of 1996 Amendment

    Amendment by section 1807(c)(2) of Pub. L. 104-188 applicable to 
taxable years beginning after Dec. 31, 1996, see section 1807(e) of Pub. 
L. 104-188, set out as an Effective Date note under section 23 of this 
title.


                    Effective Date of 1994 Amendment

    Section 309(e)(2) of Pub. L. 103-296 provided that: ``The amendment 
made by subsection (d) [amending this section] shall apply with respect 
to benefits received after December 31, 1995, in taxable years ending 
after such date.''


                    Effective Date of 1993 Amendment

    Section 13215(d) of Pub. L. 103-66 provided that: ``The amendments 
made by subsections (a) and (b) [amending this section] shall apply to 
taxable years beginning after December 31, 1993.''


                    Effective Date of 1988 Amendment

    Amendment by section 1001(e) of Pub. L. 100-647 effective, except as 
otherwise provided, as if included in the provision of the Tax Reform 
Act of 1986, Pub. L. 99-514, to which such amendment relates, see 
section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of 
this title.
    Section 6009(d) of Pub. L. 100-647 provided that: ``The amendments 
made by this section [enacting section 135 of this title, amending this 
section and sections 219 and 469 of this title, and renumbering former 
section 135 as section 136 of this title] shall apply to taxable years 
beginning after December 31, 1989.''


                    Effective Date of 1986 Amendments

    Amendment by section 131(b)(2) of Pub. L. 99-514 applicable to 
taxable years beginning after Dec. 31, 1986, see section 151(a) of Pub. 
L. 99-514, set out as a note under section 1 of this title.
    Amendment by section 1301(j)(8) of Pub. L. 99-514 applicable to 
bonds issued after Aug. 15, 1986, except as otherwise provided, see 
sections 1311-1318 of Pub. L. 99-514, set out as an Effective Date; 
Transitional Rules note under section 141 of this title.
    Amendment by section 1847(b)(2) of Pub. L. 99-514 effective, except 
as otherwise provided, as if included in the provisions of the Tax 
Reform Act of 1984, Pub. L. 98-369, div. A, to which such amendment 
relates, see section 1881 of Pub. L. 99-514, set out as a note under 
section 48 of this title.
    Amendment by section 12111(b) of Pub. L. 99-272 applicable with 
respect to benefit checks issued for months ending after Apr. 7, 1986, 
see section 12111(c) of Pub. L. 99-272, set out as a note under section 
909 of Title 42, The Public Health and Welfare.
    Section 13204(b) of Pub. L. 99-272 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to any 
monthly benefit for which the generally applicable payment date is after 
December 31, 1985.''


                    Effective Date of 1984 Amendment

    Amendment by section 474(r)(2) of Pub. L. 98-369 applicable to 
taxable years beginning after Dec. 31, 1983, and to carrybacks from such 
years, see section 475(a) of Pub. L. 98-369, set out as a note under 
section 21 of this title.
    Amendment by section 2661 of Pub. L. 98-369 effective as though 
included in the enactment of the Social Security Amendments of 1983, 
Pub. L. 98-21, see section 2664(a) of Pub. L. 98-369, set out as a note 
under section 401 of Title 42, The Public Health and Welfare.


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 98-76 applicable to benefits received after 
Dec. 31, 1983, in taxable years ending after such date, except for 
portions of lump-sum payments received after Dec. 31, 1983, if the 
generally applicable payment date for such portion was before Jan. 1, 
1984, see section 227(b) of Pub. L. 98-76 set out as a note under 
section 72 of this title.


                             Effective Date

    Section 121(g) of Pub. L. 98-21, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
    ``(1) In general.--Except as provided in paragraph (2), the 
amendments made by this section [enacting this section and section 6050F 
of this title, amending sections 85, 128, 861, 871, 1441, and 6103 of 
this title and section 3413 of Title 12, Banks and Banking, and enacting 
provisions set out as a note under section 401 of Title 42, The Public 
Health and Welfare] shall apply to benefits received after December 31, 
1983, in taxable years ending after such date.
    ``(2) Treatment of certain lump-sum payments received after december 
31, 1983.--The amendments made by this section shall not apply to any 
portion of a lump-sum payment of social security benefits (as defined in 
section 86(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 
1954]) received after December 31, 1983, if the generally applicable 
payment date for such portion was before January 1, 1984.''


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 22, 72, 135, 137, 219, 221, 
469, 861, 871, 3402, 6015, 6050F, 6050G, 6103 of this title.
