Are Social Security Disability Benefits Taxed?

Social Security disability is subject to tax, but most recipients don't end up paying taxes on it.

Social Security disability benefits (SSDI) can be subject to tax, but most disability recipients don't end up paying taxes on them because they don't have much other income. About a third of Social Security disability recipients, however, do pay some taxes, because of their spouse's income or other household income. Supplemental Security Income (SSI) benefits are not taxed.

Federal Taxation of Social Security Disability Benefits

Here's how it works. If you are married and you file jointly, and you and your spouse have more than $32,000 per year in income (including half of your SSDI benefits), a portion of your SSDI benefits are subject to tax. If you are single, and you have more than $25,000 in income per year (including half of your SSDI benefits), a portion of your SSDI benefits will be subject to tax.

How big a portion of your SSDI benefits are subject to tax depends on how high your income is. Here's a chart with monthly income amounts that tells you whether your SSDI benefits will be taxed and the maximum portion of SSDI that could be taxed. If you have over $2,083 in income per month, calculating the actual amount of SSDI benefits that will be taxed can be quite complicated. The calculations are done on the IRS Form 1040 tax return, or you can use Social Security's tax calculator.

Individuals

Amount of Monthly Income

Amount of Annual Income

Maximum Portion of SSDI to Be Taxed

0 - $2,083

0 - $25,000

0%

$2,084 - $2,833

$25,000 - $34,000

50%

$2,834 and up

over $25,000

85%

Married Couples

Amount of Monthly Income

Amount of Annual Income

Maximum Portion of SSDI to Be Taxed

0 - $2,666

0 - $32,000

0%

$2,667 - $3,666

$32,000 - $44,000

50%

$3,667 and up

over $44,000

85%

Keep in mind that if your disability benefits are subject to taxation, they will be taxed at your marginal income tax rate. In other words, your tax rate would not be 50% or 85% of your benefits; your tax rate would probably be more like 15-25% of your benefits. Those with higher incomes (where 85% of your benefits would be taxed) might pay a tax of 35% on their benefits. The tax rate is the same used for your other income.

Taxation of Social Security Disability Backpay

Large lump-sum payments of back payments of SSDI (payments of benefits for the months you were disabled but not yet approved for benefits) can bump your income up for the year in which you receive them, which can cause you to pay a bigger chunk of your backpay in taxes than you should have to. To avoid losing part of your backpay this way, you are allowed to apply the SSDI benefits owed from a prior year to prior tax returns, lowering your income for the year you receive the lump sum. For example, if you were entitled to disability benefits for 22 months before you received your back pay, you could amend your tax returns for two prior years to claim some of the income in those years instead of the current year. You should ask a lawyer or CPA for help on this. For more information, read our article on how Social Security disability backpay is taxed.

State Taxation of Social Security Disability Benefits

Most states do not tax Social Security disability benefits. The following states, however, do.

Connecticut

Nebraska

Colorado

North Dakota

Iowa

Rhode Island

Kansas

Utah

Montana

Vermont

Minnesota

West Virginia

Some of these states use the same income brackets as the federal government (above) to tax SSDI benefits, but others have their own systems. To find out how your state taxes SSDI benefits, see our article on state taxation of SSDI benefits.

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