Why Provisional Income Matters for Social Security Benefits

In this article...
  • Your Social Security benefits may be taxable depending on your provisional income. Find out how to calculate provisional income and what it means to your taxes.

How Provisional Income Affects Social Security Taxes

Nearly 65 million people received Social Security payments in 2020. These benefits provide important income to Americans who are retired or disabled. Depending on your provisional income and filing status, you could owe tax on these payments. Read on to learn how provisional income determines the taxable amount of your benefits and how the federal government calculates this figure.

Do I Have to Pay Federal Taxes on Social Security Income?

Most people don't pay federal taxes on Social Security benefits unless they have substantial income. This income includes wages, self-employment, interest, dividends, pensions and capital gains. Depending on your filing status, up to 85% of your retirement or disability benefits may be taxable.

What's Provisional Income?

Provisional income is a calculation that determines how much of your Social Security benefits are taxable. The Social Security Administration refers to provisional income as combined income.

If your provisional or combined income exceeds certain thresholds — depending whether you file individual or joint taxes — a portion of your benefits are taxable at the federal level.

How to Calculate Provisional Income

To determine your provisional income, add the following:

  • 50% of your Social Security benefits. You can find the amount of benefits you received during the year on your Social Security Benefit Statement (Form 1099) sent out in January.
  • Gross income. This includes wages, self-employment, pensions, interest, dividends and capital gains. It doesn't include your Social Security benefits.
  • Tax-free interest. This is interest you receive from investments such as municipal bonds. The interest is tax-exempt at the federal level but is included in your provisional income calculation.

The total of these three items gives you your provisional income.

How Provisional Income Determines Your Level of Taxation

Once you've calculated your provisional income, you can see which bracket you're in for the purposes of Social Security taxes. The portion of your benefits that are taxable depends on whether you file taxes as an individual or jointly as a married couple.

You don't pay taxes on any of your Social Security benefits if:

  • You're filing as an individual and have provisional income of less than $25,000
  • You're filing a joint return and have provisional income of less than $32,000

You may have to pay income tax on up to 50% of your Social Security benefits if:

  • You're filing as an individual and you have provisional income between $25,000 and $34,000
  • You're filing a joint return and have provisional income between $32,000 and $44,000

You may have to pay income tax on up to 85% of your Social Security benefits if:

  • You're filing as an individual and you have provisional income of more than $34,000
  • You're filing a joint return and have provisional income more than $44,000

What If I Owe Taxes on My Social Security Benefits?

If your provisional income puts you into a higher bracket for Social Security taxes, you can arrange to spread out your tax payments throughout the year through:

  • Quarterly estimated tax payments

Tax withholding from your monthly benefits