Will you pay taxes on your Social Security disability benefits? The simple answer is that it depends.
Whether you pay or not is related to your total taxable income, and whether you qualify for disability under SSI or SSDI. Factors such as base income, filing status (your spouse may earn income), and other income come into the picture. About one third of states tax SSDI.
Table of Contents
- 1 Are Social Security Disability Benefits Taxable?
- 2 How Much of Social Security Income Is Taxed?
- 3 How To Set Yourself Up For Success With Social Security and Taxes
Are Social Security Disability Benefits Taxable?
Your income tax is determined from a “base amount” that combines any SSI or SSDI income with other sources of income (including your spouse’s), according to the following:
- Under the specified base amount, Social Security benefits are not taxable.
- Between the base and a maximum amount, Social Security income will be taxed up to 50%.
- Over the maximum amount, Social Security benefits are taxable up to 85%.
Your monthly benefits are taxable, and if your claim is approved by SSA under Title 2 (SSDI), you may pay taxes.
To figure out your total income: add half of your benefits to all other income sources, including any tax-exempt interest. The SSA provides more information on specific forms, such as the form SSA 1099-A, on its website.
Most states exempt tax payments for Social Security Disability benefits, but some (such as Nebraska) do not.
Taxes on SSI
SSI is considered a “needs-based” program and is not taxable. Unlike Social Security Disability Insurance (SSDI), which we discuss in detail below, if you only receive SSI you will not pay federal or state income taxes, no matter where you live. Read our post on whether social security income is taxable for more detailed information.
Taxes on SSDI
SSDI benefits are somewhat different than SSI. The Social Security Administration can sometimes set a disability onset date up to one year prior to gaining approval for benefits, resulting in a lump sum or back payment. This amount can be significant and can alter your income in a given tax year.
We discuss more about lump sums later, but if you have received a large amount it can become a potential tax liability. If you are filing as a head of household, for example, the Internal Revenue Service will add your lump sum (or a portion of it) to your total income and the “maximum amount” is only $34,000–beyond which, you will be taxed at 85% of the standard tax rate.
Consider factors such as filing a joint return and how your additional assets add up in the current year. Your spouse’s income can have an impact.
Other Types of Social Security Income
SSA taxes retirees, recipients of Medicare, and survivors–to name a few–at exactly the same rates as SSDI recipients. Benefits paid to a child may be taxed under the child’s Social Security number rather than the parent’s.
How Much of Social Security Income Is Taxed?
We define base and maximum amounts for different marital statuses. Married couples are allowed a somewhat higher income.
- The base amount is $0 and the maximum is $0 if you are:
- Married filing separately
- The base amount is $25,000 and the maximum is $34,000 if you are:
- Single, a Head of Household or a Qualifying Widow(er)
- The base amount is $32,000 and the maximum is $44,000 if you are:
- Married filing jointly
If your filing status is married but filing separately, and you and your spouse have lived apart the entire tax year, you may use the same base and maximum amounts as a single filer would.
Income Thresholds For Taxes on Disability Benefits
The tax laws are written to ensure that Americans those receiving retirement benefits, and disability recipients do not pay exorbitant amounts.
As a result, SSI taxes are non-existent and SSDI tax rates are low unless your marital status puts you into the “maximum amount” category. Even in the case of lump sum back payments, the IRS has written provisions into the law to protect disability recipients.
If your state taxes are likely to be high due to marital status or unexpected income, consult a tax professional or disability attorney for advice.
Things To Know When You’re Filing A Tax Return
If you are receiving SSDI benefits, your income tax return gets a little more complicated. A law firm specializing in disability can be helpful. You should always consider the following:
- What is your total income?
- What is your filing status?
- Do you qualify for deductions?
- Are you claiming dependents?
- Have you received a lump sum payment?
What About For Lump Sum Payments?
Your medical condition may have qualified you for benefits up to a full year prior to your filing date. If so, you will receive a lump sum payment that is taxable. Consult the base amount and maximum amounts we’ve provided to calculate your tax rate.
Using form SSA 1099-A, lump-sum payments can be spread out over several years but reported on one tax return. In this way, the IRS doesn’t create penalties for those receiving SSA back pay.
How To Set Yourself Up For Success With Social Security and Taxes
If you are granted SSI, taxes will not be an issue for you. But most individuals who receive disability get SSDI and many will have some Federal tax burden.
A free evaluation from your disability attorney can be a helpful first step in untangling your income tax picture. Hiring a disability lawyer who is experienced in handling all aspects of SSA claims will help with tax advice, too.