Provisional income is a term used by the Internal Revenue Service (IRS) to describe a portion of an individual's Social Security benefits that may be subject to federal income tax. Provisional income is calculated by adding an individual's adjusted gross income (AGI), tax-exempt interest, and one-half of their Social Security benefits.
The taxation of Social Security benefits is determined by the amount of an individual's provisional income. If an individual's provisional income is below a certain threshold, none of their Social Security benefits are taxed. However, if an individual's provisional income exceeds this threshold, a portion of their Social Security benefits may be subject to federal income tax.
The thresholds for the taxation of Social Security benefits based on provisional income are as follows:
For individuals who are married and filing jointly, the threshold is $32,000.
For individuals who are single or head of household, the threshold is $25,000.
If an individual's provisional income exceeds the threshold, up to 50% of their Social Security benefits may be subject to federal income tax. Additionally, if an individual's provisional income exceeds $44,000 (for those who are married and filing jointly) or $34,000 (for those who are single or head of household), up to 85% of their Social Security benefits may be subject to federal income tax.
It's important to note that the taxation of Social Security benefits is a complex issue, and that the rules and thresholds can change from year to year. To determine whether a portion of their Social Security benefits will be taxed, individuals should consult with a tax professional or use the IRS's Benefits Planner.
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