Is Social Security Disability taxable? For most recipients, Social Security Disability Insurance benefits aren’t taxable. But there is a caveat. If your SSDI and income exceed a certain threshold, you may owe federal taxes on up to 85 percent of your benefits. That typically only comes into play if you have an additional income source or a spouse who works.
Very few states tax SSDI, so you won’t owe state income tax on your benefits unless you live in one of them. However, many recipients are unclear about their tax responsibilities. In a worst-case scenario, you might find out you owe taxes come April 15, which can be unwelcome if you’re unprepared.
Rob Levine Law explains the basics of SSDI taxes and how they may apply to your situation.
How Do Federal Taxes Affect Social Security Disability Benefits?
If SSDI benefits are your only income, your benefits are likely not taxable. However, under federal tax laws, all sources of income you receive are counted toward taxes. If the combined total reaches a certain threshold, you will owe taxes. Thus, if, in addition to your SSDI, you receive income from interest, self-employment, dividends, or any other source, you must include this income when determining whether you owe taxes on your benefits.
According to the IRS, an SSDI recipient owes federal taxes on their benefits if the total of half their benefits plus all other income exceeds the base amount of their filing status.
The base amount for each filing status is as follows:
- Single, Head of Household, Qualifying Surviving Spouse: $25,000
- Married Filing Separately – Living Apart for the Entire Year: $25,000
- Married Filing Jointly: $32,000
- Married Filing Separately – Lived With Spouse for Part of the Year: $0
Married individuals filing jointly combine their SSDI and other income sources to determine whether they exceed the base amount. If you’re married and filing separately, your base amount depends on whether you live with your spouse at any time during the year.
How Much of My Social Security Disability Is Taxable?
Up to 50 percent of SSDI benefits are taxable if you have between $25,000 and $34,000 of income and are filing as single, the head of household, married and filing separately, or a qualifying widow or widower.
For married couples filing jointly, 50 percent of SSDI benefits are taxable if they have income between $32,000 and $44,000.
If your income exceeds the threshold amount—$34,000 or $44,000—up to 85 percent of SSDI benefits may be taxable.
How To Calculate Taxes on Social Security Disability Benefits
IRS rules can be a bit confusing, even for experienced accountants. Here are some hypothetical examples for each filing status to see how income tax may apply.
Single, Head of Household, or Qualifying Surviving Spouse
Assume your SSDI benefits are $2,000 per month. You earn an additional $1,000 monthly through your part-time job at a retail store. Since the total of half your SSDI benefits—$12,000—plus earnings from the retail store—$12,000—doesn’t exceed the $25,000 base amount, you won’t owe income tax on SSDI benefits. However, your wage earnings are fully taxable.
Married Filing Separately - Living Apart
You receive $3,000 in monthly SSDI benefits and draw $1,000 monthly from a pension. You’re in the midst of a divorce from your spouse and maintain your own living space. The total of half your SSDI benefits and all your pension earnings for the year is $18,000 + $12,000, or $30,000. Since it exceeds the $25,000 filing base amount, you’ll owe taxes on up to 50 percent of your SSDI benefits.
Married Filing Jointly
Your SSDI benefits are $2,000 monthly. Unfortunately, your medical condition prevents you from working, and you have no other income source. Your spouse works as a teacher, earning $50,000 annually. Since the total of your spouse’s income and half your SSDI benefits exceed the base filing amount and the $44,000 threshold, up to 85 percent of your benefits may be taxable.
Married Filing Separately - Living Together
Your filing status automatically means your SSDI benefits are taxable by up to 85 percent under current IRS rules.
What Should You Do if You Owe Taxes on SSDI Benefits?
Planning ahead is the easiest way to prevent a large tax bill at year-end. If you anticipate owing federal income taxes, you can ask the Social Security Administration to withhold benefits from your monthly SSDI checks. The agency allows federal income tax withholdings up to 22 percent. Call the SSA at (800) 772-1213 to make a withholding request. An agent will help you set up a withholding amount.
The SSA also accepts mailed, faxed, or in-person withholding requests. To submit the request through the mail or fax, complete IRS Form W-4V and submit it to your closest SSA office. You can also schedule an appointment to speak directly with a local agent.
All SSDI recipients must file an annual tax return, even if no tax is due. The usual due date for annual federal income tax returns is April 15. If you discover you owe taxes after completing your return, you can either pay the amount due or request an extension.
It’s never a bad idea to seek help from a tax professional or an attorney. They can review your situation and provide personalized guidance concerning your SSDI tax liabilities.
How Can a Social Security Disability Lawyer at Rob Levine Law Help?
Attorneys at Rob Levine Law have 75 years of combined experience representing clients in Social Security disability claims. Since we opened our doors over 25 years ago, we’ve helped over 50,000 clients secure benefits and compensation in disability and personal injury cases.
Our firm has offices in Rhode Island, Connecticut, Massachusetts, and New Hampshire. We’re well-positioned to assist clients in all four states. If you are considering a claim for SSDI, need help with an appeal, or have questions about calculating benefits, don’t hesitate to reach out. Rob Levine Law has significant experience navigating SSDI claims, and we can assist you.
Contact a Social Security Disability Lawyer at Rob Levine Law Today!
At Rob Levine Law, there are no fees unless we win for you. Call us at (800) 724-3920 or contact us online to schedule your free consultation.
