Provisional Income

The level of income that is used to determine whether a taxpayer is liable for tax on his or her Social Security benefits, and by how much. Provisional income is calculated by making certain adjustments to the taxpayer's gross income.

The formula for determining provisional income is as follows:

Provisional income = gross income + tax-free interest + 50% of Social Security benefits + any tax-free fringe benefits and exclusions - adjustments to income (except for the student loan deduction, tuition and fees deduction or domestic production-activities deduction)

Provisional income is calculated on Worksheet 34-1, unless the taxpayer is an active participant in a qualified plan and also has made or intends to make deductible contributions to a Traditional IRA for the year.

If the taxpayer's provisional income exceeds a certain base amount, then part of the taxpayer's Social Security benefits may become taxable.