Is Social Security Disability Taxable?

Jackie Jakab, Attorney
By Jackie Jakab, Attorney
A woman fills out a social security disability application next to a computer.

Do you pay taxes on SSDI? The short answer is: it depends.

The slightly longer answer is: Most often, no. About a third of Social Disability benefits recipients pay some tax on their benefits–often because a spouse’s earnings changes their income and makes them taxable.

For the full answer, read on. We’ll explain the ins-and-outs, rules, and exceptions of taxation on Social Security Disability.

Social Security Disability Benefits and Taxes

If you receive over $1,350 per month from working, you’re not eligible for Social Security Disability Insurance (SSDI).  At this income level, your benefits wouldn’t be taxable because the income is too low to be taxed.

On the other hand, if you have other sources of income (like stock dividends or your spouse earns income), you may have to pay taxes on your benefits. Let’s explore further.

If I Do Have to Pay Taxes on My Social Security Disability Benefits, How Much Do I Owe?

The amount of taxes you pay on Social Security Disability depends on your income. And the income level at which you start being taxed depends on your tax filing status.

When your income level rises above a certain threshold, based on your filing status, some amount of your benefits is taxable.

Here are some examples of how this works at the federal level.

If you are single, the head of your household, or married and filing separately:

  • You pay taxes on 50% of your benefits when your income is between $25,000 and $34,000.
  • You pay taxes on 85% of your disability benefits if your income is more than $34,000.

If you’re married and filing your taxes jointly:

  • You pay taxes on 50% of your benefits when your income is between $32,000 and $44,000.
  • You pay taxes on 85% of your disability benefits when your income exceeds $44,000.

What About State Taxes?

Most States Do Not Tax Social Security Disability Benefits, But If You Live in a State That Does, Your Benefits May be Taxable Depending, Again, on Your Income.

Unfortunately, this amount varies from state to state and may differ from the federal income threshold.

Only three states (Minnesota, Montana, and New Mexico) currently follow the IRS model (explained above) for taxing Social Security Disability benefits. In some states, your benefits would not be considered taxable unless you (or your household) have an annual income of more than $75,000.

What States Tax Social Security Disability Benefits?

Many states have stopped taxing Social Security Disability. Currently, there are just 12 states that do:

  • Connecticut
  • Colorado
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Again, in these states, your benefits are only taxable if your income is above the amount the state stipulates. This amount may change, so check each year.

It may be helpful to talk to an accountant (or the helpful disability experts at Atticus) if you live in one of these states and have questions about your specific circumstances.

Taxes and Social Security Disability Back Pay

If you’ve had a long delay before the Social Security Administration approved your application, you may receive a large lump sum in back pay. This could increase your annual income to an amount that exceeds taxable thresholds.

Luckily, in these cases, there are ways to reduce the taxes you may owe. For instance, applying what you owe to a previous year.

Sound complicated? It is. In fact, back pay in lump sum form can also affect what you owe to the state in taxes on your Social Security Disability benefits. This is why many people turn to Atticus for help. An experienced Social Security Disability lawyer can advise you about calculating the taxes you may owe on a lump sum amount for both the IRS and state and how to reduce them.

The calculations here may prove complex enough to require the help of a professional tax attorney or certified accountant.

Rely on Atticus for Help With Your Social Security Disability Benefits and Tax Questions

If you have more questions regarding disability benefits and taxation, or you want information that applies specifically to your situation, contact Atticus. We know how complicated taxes and benefits can be. When dealing with the IRS or state taxes, it can be overwhelming, and we know that most people want to avoid making tax mistakes at all costs. For that reason, don’t hesitate to rely on our services for help. We will put you in touch with an experienced Social Security Disability lawyer who will have the ready answers you need when you call. Our service is always 100 percent free.

Social Security Disability and Taxes FAQs

How Much of My Social Security Disability is Taxable?

If you are single and your income is under $25,000 annually (or married and filing separately), your Social Security Disability benefits are NOT taxable. If you are married and file jointly with your spouse, your Social Security benefits ARE taxable if your income is more than $32,000.

Is Social Security Disability Income Taxable By the IRS?

Yes. Social Security Disability income is taxable if your annual income exceeds $25,000 when filing single (or filing separately from your spouse) or $32,000 if you are married and filing jointly.

Can I Avoid a Big Tax Bill at Tax Time When Receiving Social Security Disability Benefits?

If your income meets the taxable threshold, and you’re concerned about the possibility of owing a large tax bill each April, you can request some of your Social Security Disability benefits to be withheld each month, or you can make quarterly estimated tax payments to the IRS and state. Talk to a tax professional for more information.

How much of your benefits should you pay each month? Again, that depends on your individual circumstances. Atticus can pair you with a Social Security Disability lawyer who can review your income and help you determine the ideal amount to divert from your monthly benefits or pay in estimated owed taxes each quarter.

Are Social Security Benefits Considered Income?

Yes, Social Security Disability benefits are regarded as earned income by the IRS, which is why they are taxable as income if you earn above a certain amount.

Ready to get benefits today?
Jackie Jakab, Attorney
Jackie Jakab, AttorneyJackie Jakab is Atticus’s Legal Director. She’s a licensed attorney, a graduate of the University of Chicago Law School, and has counseled thousands of people seeking disability benefits.
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