Some Social Security Disability beneficiaries have to file federal income taxes on their Social Security Disability benefits, while others do not. Generally speaking, if Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) is your only sources of income, you will not have to file any federal income taxes on your Social Security Disability benefits.
Further Reading: What Is SSI?
About 2/3 of Social Security Disability recipients don’t pay federal income taxes on their Social Security Disability payments. Whether or not you have to pay taxes is determined by your level of income. In 2024, you do not have to pay federal income taxes if your combined taxable income is not greater than $25,000 for a single person or $32,000 for a married couple filing jointly.
State and local income taxes may apply to your disability benefits, and you will want to check with your state and local authorities or your income tax preparer or accountant to make sure that you are aware of any state or local income taxes you will need to pay. In most cases, if you are exempt from federal income tax on your Social Security disability benefits, you won’t have to pay any income tax, but you should confirm this with an accountant.
It is especially important that you see an accountant or tax preparer when you start collecting SSDI if your income is high enough that you expect to pay taxes. You will want to make sure that you have enough deducted or set enough money aside to cover your income tax obligations.
It is worth noting that Social Security Disability benefit payments are taxed differently than other income. Generally speaking, only half of your Social Security Disability benefit payments are counted as taxable income. Of course, the rest of your income is taxable under the normal rules, regulations, and laws which apply.
To determine whether or not you will need to pay federal income taxes on your Social Security Disability Insurance payments, you will need to add up all of your income. This includes:
- Half of your income from Social Security Disability payments.
- All of your taxable pension payments.
- Any wages you earn. (Remember that if you earn more than $1,000 per month, you are considered gainfully employed and may be disqualified for Social Security Disability).
- All interest on savings accounts or similar savings vehicles, including tax sheltered or tax deferred interest.
- All dividends on stocks, bonds, mutual funds, or other investments.
- All passive income, such as rent.
- All other normally taxable income.
If, after you add all sources of income together (remembering that you only need to factor in half of your Social Security Disability payments), check to see whether you are above or below the limit. If you are making more than $25,000 (or $32,000 for a married couple), your Social Security Disability benefits are taxable and you will need to pay federal income tax on them.
If you are married, but filing separately, your Social Security Disability benefits will be taxable, regardless of what your income actually is. Additionally, if you are making more than $34,000 (for a single individual) or $44,000 (for a married couple), you may be taxed on up to of your Social Security Disability payments.
Taxes on disability payments can be rather complicated. If you had retained the help of a disability attorney during the claims process, be sure consult with that individual regarding disability benefits and taxable income.