Categories: General Tax Terms
Provisional Income refers to the calculation used to determine eligibility for certain tax benefits, including the taxation of Social Security benefits. It is calculated by taking the sum of adjusted gross income (AGI), tax-exempt interest income, and half of the Social Security benefits received.
The formula for Provisional Income is:
Provisional Income = AGI + Tax-Exempt Interest + (0.5 × Social Security Benefits)
For individuals, if the Provisional Income exceeds certain thresholds, a portion of Social Security benefits may be subject to federal income tax. For example, in 2023, if a single filer has a Provisional Income above $25,000, up to 85% of their Social Security benefits may be taxed.
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