Which retirement income sources are excluded from provisional income under the 2025 update?
Executive summary
Provisional income for 2025 is computed as adjusted gross income (AGI) plus tax‑exempt interest plus one‑half of Social Security benefits, so the question of what is “excluded” turns on what does not count toward AGI or tax‑exempt interest in that formula — chiefly qualified Roth distributions and certain charitable IRA distributions — while most pre‑tax retirement distributions do count (or count when they become taxable) toward provisional income [1] [2] [3].
1. How the 2025 provisional‑income formula works — the baseline to judge exclusions
Provisional income (sometimes called combined income) equals AGI plus tax‑exempt interest plus one‑half of Social Security benefits, a construction used to determine whether and how much of Social Security is taxable [1] [4]; AGI for this purpose excludes the line‑item representation of Social Security benefits on the 1040 but the calculation explicitly adds back one‑half of those benefits into the provisional‑income test [5] [1].
2. Clear exclusions: Roth account withdrawals and qualified Roth distributions
Because Roth IRAs and Roth 401(k) distributions are funded with after‑tax dollars and qualified withdrawals are tax‑free, those receipts do not add to MAGI and therefore do not increase provisional income — financial firms and tax guides note that Roth withdrawals are not included in the MAGI component used for provisional income [2] [3].
3. Charitable tactics that remove money from provisional‑income calculations
Qualified charitable distributions (QCDs) from IRAs — direct transfers from an IRA to a qualified charity that satisfy required minimum distribution obligations — are treated as excluded from taxable income and therefore can reduce the AGI used in the provisional‑income test, a strategy highlighted by retirement planners as a way to limit taxes on Social Security [3].
4. What is not excluded — traditional retirement account distributions and tax‑exempt interest
Distributions from traditional IRAs, 401(k)s and other pre‑tax employer plans are counted as ordinary income and therefore increase AGI and provisional income when withdrawn [1] [6]; contrary to some misconceptions, interest from municipal bonds — though often tax‑exempt for federal income tax — is explicitly included in the provisional‑income calculation as “tax‑exempt interest” and therefore raises provisional income [1] [6].
5. Social Security’s special role: excluded from AGI line but half is added back
Social Security benefits themselves do not sit as part of AGI on line 11 of Form 1040 in the sense that the provisional calculation starts from AGI excluding line 6b, yet the statutory test then adds one‑half of Social Security benefits into the provisional‑income formula, meaning benefits are neither fully excluded nor fully included — they are treated via the half‑addition rule that governs taxability thresholds [5] [4].
6. Practical implications, planner caveats and who benefits from emphasis
Tax and wealth managers stress Roth conversions, timing of pre‑tax withdrawals, use of QCDs, and tax‑exempt interest management as levers to control provisional income because the thresholds (e.g., $34,000 single, $44,000 married in common 2025 discussion) determine whether up to 85% of benefits could be taxable; however, these recommendations come from firms with products or advisory services, so readers should note the potential commercial motives in some reporting [1] [2] [3].
7. Limits of the reporting and remaining open questions
The cited sources establish what is generally excluded from the provisional‑income test (notably Roth distributions and QCDs) and what is included (traditional distributions, municipal bond interest, and half of Social Security), but none of the provided extracts substitutes for reading IRS Publication 915 and current IRS notices for taxpayer‑specific edge cases or recent formal regulatory changes, which are the definitive authorities [1] [4] [7].