When does the law say that you must count benefits as reportable income? Only when you income - in tax jargon, you MAGI, short for Modified Adjusted Gross Income - exceeds specified amounts. In calculating whether income exceeds the thresholds for benefits to be taxed, the MAGI rules require you to count not just salaries, pensions, dividends, capital gains, rents and the like, but also whatever you receive as tax-exempt interest from obligations issued by state and local governments or from mutual funds, as well as 50 percent of your benefits.

Before 1994, you were taxed up to 50 percent of those benefits when your MAGI exceeded $25,000 for singles and $32,000 for joint filers.

Now you are taxed up on to 50 percent of those benefits when your MAGI is between $25,000 and $34,000 for single persons or between $32,000 and $44,000 for couples filing jointly, which is no different than the rules before 1994. In addition, however, you are taxed on up to 85 percent of those benefits when your MAGI is above $34,000 for singles and $44,000 for joint filers.

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