What Is Provisional Income?

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Some people assume that Social Security benefits aren't taxable. However, in some cases, individuals must pay income tax on up to 85 percent of their earnings. To determine what portion of your benefits from Social Security is taxable, you must calculate your provisional income and compare it to federal income tax limits.

Provisional Income

Provisional income is the total of your adjusted gross income, tax-exempt interest and half of your Social Security benefits for the year. If your provisional income is above a certain limit, you must pay income tax on a portion of your benefits. The higher your income, the larger the portion of taxable benefits will be. However, the Internal Revenue Service won't typically require you to pay tax on more than 85 percent of your benefits.

Income Limits

If you file a single return or as a head of household and your provisional income is less than $25,000, you won't owe tax on your Social Security benefits. If you file a joint return, you won't owe tax on your Social Security benefits if your provisional income is less than $32,000. Married individuals who file joint returns must pay tax on a portion of their benefits regardless of their provisional incomes.

Taxable Portion

If your provisional income falls between $25,000 and $34,000 on a single return or head of household return, you will owe tax on no more than half of your benefits. You will also owe tax on no more than half of your benefits if you file a joint return and your provisional income falls between $32,000 and $44,000. If your provisional income exceeds these amounts or if you are married and filing separately, you will typically owe tax on 85 percent of your benefits.

Example

To calculate provisional income, combine your adjusted gross income, tax-exempt interest and half of your Social Security benefits. For example, if your adjusted gross income is $20,000, you receive $10,000 per year in Social Security benefits, and you earn $2,000 per year in tax-exempt interest, your provisional income would be $27,000 [20,000+(0.5 x 10,000) +2,000 = $27,000]. If you are filing as an individual or a head of household, you won't owe tax on more than half of your benefits. If you are filing a joint return, you won't owe any tax on your Social Security benefits.