Is Social Security Disability Insurance (SSDI) Taxable?
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Most beneficiaries will pay tax on 50% of SSDI benefits, but some pay tax on up to 85% of their benefits.
How much tax you pay on your SSDI benefits depends on your filing status and tax bracket.
Lump-sum back payments of SSDI benefits may be taxable.
Most beneficiaries will pay tax on 50% of SSDI benefits, but some pay tax on up to 85% of their benefits.
How much tax you pay on your SSDI benefits depends on your filing status and tax bracket.
Lump-sum back payments of SSDI benefits may be taxable.
Social Security Disability Insurance (SSDI) benefits may be taxable if half of your SSDI income plus any additional income exceeds $25,000 for single filers or $32,000 for joint filers. The amount you pay depends on your total income and tax bracket. You may also owe state income taxes.
Are disability benefits taxable?
Yes, your SSDI benefits are usually taxable if your combined income is above a certain amount. For this purpose, combined income includes your adjusted gross income, any nontaxable interest earned on investments and half of your Social Security benefits. To find out whether your SSDI benefits are taxable, add the following two figures:
Half of your Social Security income. This includes SSDI, Social Security retirement benefits and Social Security survivor benefits. It doesn’t include Supplemental Security Income (SSI).
All other sources of income. This includes earned income and investment income, for example.
How much of your SSDI benefits are taxable?
Usually, if your total income increases, the percentage of your Social Security income that’s subject to federal income taxes increases as well. It’s common for most beneficiaries to pay federal taxes on 50% of their SSDI income, but beneficiaries won’t pay taxes on more than 85% of their benefits. You might have to pay taxes on more than 50% of your SSDI benefits if you fit one of these scenarios:
The sum of half of your Social Security benefits and all of your other income is more than $34,000 for single filers or $44,000 if you are married and filing jointly.
You are married, filing separately and you and your spouse lived together at any point during the taxable year.
Use the table below to learn if you’re more likely to pay tax on half or more of your SSDI benefits.
If your tax status is: | Then 50% of your benefits may be taxable if your combined income is: | Then up to 85% your benefits may be taxable if your combined income is at least: |
|---|---|---|
Single, head of household or a qualifying surviving spouse | $25,000-$34,000. | $34,001. |
Married filing jointly | $32,000-$44,000. | $44,001. |
Married filing separately and you lived apart from your spouse for the entire year | $25,000-$34,000. | $34,001. |
Married filing separately and you lived with your spouse at any time during the tax year | Unlikely to be only 50%. | No limit to be applicable. |
How much tax do I actually have to pay on my SSDI benefits?
Though up to 85% of your benefits may be subject to income tax, the amount of tax you’ll actually owe on that portion of your Social Security income depends on your tax bracket and filing status.
Your income from all taxable sources and any tax deductions you qualify for determine which tax bracket you’re in.
Depending on where you live, you might also owe state income taxes on your benefits. Tax rates and potential exclusions or deductions for Social Security income vary from state to state. Some states don’t have income taxes.
Taxes on SSDI back payments
The Social Security Administration (SSA) commonly takes months to process SSDI applications, and most applicants will not receive a benefit check before their sixth month of a qualifying disability. If the SSA denies your application, you can appeal for a reconsideration, which will add to your wait time and create a longer time frame for back payments if you’re eventually approved for benefits.
In all of these instances, the SSA may send you a payment that covers the time it was processing your application. That lump sum amount is taxable.
A large payment could trigger an unexpectedly large tax bill. You pay taxes on the back payment for the tax year in which you receive it, even if a portion of the payment was for a previous tax year.
Although you can’t amend a prior year’s tax return for this, the Internal Revenue Service gives you the option to calculate what you would have owed if the back payments occurred in the prior tax year. If that results in a lower tax bill, you can pay that lower amount instead.
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