Are Social Security Disability Benefits Taxable?

taxable benefits

It’s often a topic of debate: Should you be taxed for something that the government gives you? More importantly, are Social Security benefits taxable? In fact, yes — Social security disability benefits are taxable. However, most beneficiaries don’t pay taxes on SSDI because they have very little (if any) additional income. Approximately one-fourth of SSDI recipients owed federal income taxes in recent years, usually because of their spouse or other household earnings.

How the Social Security Administration Calculates SSDI Benefits

Social Security disability insurance (SSDI) covers individuals who worked five out of the last 10 years and paid taxes into that trust fund. How can you get approved for SSDI benefits? Prove you cannot work due to a physical or mental condition lasting at least 12 months or which may result in your death. Benefits don’t start until five months after you become disabled and submit your Social Security disability application. If you have questions or need help applying for benefits, a Social Security disability attorney or advocate can assist you.

Your monthly SSDI income from the Social Security Administration depends on your earnings record. And even though your SSDI benefits come directly from the federal government, they still may be taxable. Read on to learn how monthly disability income is taxed for individuals as well as for joint income tax returns.

How Taxable Benefits Impact Individual Returns

The SSA states your benefits may be taxed if you file an individual return and your total income’s over $25,000. If you make $25,000-$34,000, you must pay taxes on about 50% of your benefits. If you make more than $34,000, 85% of your benefits are taxable.

How to List Taxable Benefits on Joint Returns

If you file a joint return and your combined income is over $32,000, your benefits may be taxable as well. If your income is between $32,000-$44,000, you may owe taxes on half the value of your benefits. If your combined income is more than $44,000, 85% of your benefits may be taxable.

Please understand that “85% of your benefits” does not mean 85% of your benefits will be taken away from you. In fact, all disability income benefits are taxable at the marginal tax rate. That means you’ll probably pay a tax rate of 10-15% on 50-85% of your SSDI income to the IRS annually. (This information is specifically for calculating your yearly federal taxes). Thirteen U.S. states have their own disability benefits income tax system:

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

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