If you file a federal tax return as an individual, you could pay income tax on up to 50% of your Social Security benefits (assuming a combined income of $25,000 to $34,000).

Even if you fall into the highest bracket, though, it doesn't mean exactly 85% of your benefits will be taxed — this is merely the maximum percentage that can be included in your taxable income.

Schedule K-1 is one of the most complex tax forms that an investor is ever likely to see. It's hard enough to understand from a federal income tax perspective, but when you add in the implications ...