Massachusetts Life Insurance Practice Exam 2026 – Complete Study Guide

The correct answer is that Social Security benefits start becoming taxable for an individual filer when their combined income exceeds $25,000. Combined income is defined as the sum of adjusted gross income, nontaxable interest, and half of the Social Security benefits the individual receives.

This threshold reflects the intent of the Social Security program to provide support to lower-income individuals, and as such, taxes on benefits are designed to only affect those with a higher income level. If an individual's income is below this threshold, their Social Security benefits are not subject to federal income tax, thereby protecting those who rely heavily on these benefits for their basic living expenses.

Knowing this threshold is crucial for financial planning and understanding how Social Security income impacts overall tax liability. The other options represent income levels either below or well above the threshold, which do not accurately reflect when taxation on benefits begins for individual filers.