Is Social Security Disability Taxable?

If your income is above a certain amount this tax season, you may have to pay taxes on your Social Security Disability Insurance benefits. Some states don’t tax disability benefits at all.

In order to determine whether a SSD is taxable, you need to consider a variety of factors, such as your marital status, combined income amount, if you are undergoing a married filing, etc.

Is Social Security disability taxable?

When you receive other income that exceeds a certain threshold, you may have to pay taxes on your Social Security Disability Insurance benefits. As SSDI requires disability and limited income to qualify, you may not have additional income to exceed this threshold if you are disabled and have limited income.

When you receive income from other sources, such as dividends or tax-exempt interest, or your spouse earns income, your Social Security Disability Insurance benefits may be taxable. You will need to know the threshold for when SSDI becomes taxable if this describes your situation.

If your SSDI benefits, plus all other income, exceeds an income threshold based on your tax filing status, one-half of your benefits may become taxable.

• The maximum amount for single, head of household, qualifying surviving spouse, and married filing separately taxpayers is $25,000.
• For married couples filing jointly, the amount is $32,000
• During the tax year, if you filed separately but lived with your spouse, you owed no taxes

It is possible for married individuals to report income of up to $32,000 (half their SSDI benefits plus all their other income) before they are required to pay taxes on their SSDI benefits. Depending on your tax filing status, you may be eligible for two different benefit inclusion rates if you earn more than these limits.

• The benefit portion of your income up to $34,000 may need to be included in your taxable income as a Single filer.
• In the case of income exceeding $34,000, up to 85% is included in your tax return.

If you file jointly as a married couple, you would pay the following taxes:

• Depending on your combined income between $32,000 and $44,000, you may receive 50% of your Social Security Disability Insurance benefits
• The combined income of you and your spouse may exceed $44,000, so you can receive up to 85% of your disability benefits

Income taxes on disability.

The U.S. Social Security system allows workers who work long enough and pay their taxes to participate. Over time, you and your family will receive benefits from the system.

When you work and become disabled, but you have limited resources and means to earn income, the Social Security Disability Insurance program may be of assistance to you. Social Security disability income is taxable because it is funded by your taxes, but since you and your children receive benefits, you may wonder if it is taxable.

Also check: Can You Change Your Social Security Number?

How does Social Security Disability Insurance work?

In the event you become disabled, you are eligible for Social Security Disability Insurance (SSDI), a social insurance program funded by payroll taxes. If you meet the criteria for disability and are unable to work for a year or more, you can generally earn coverage benefits from the Social Security Administration (SSA).

Those who have suffered a serious, long-lasting medical condition that meets Social Security’s strict definition of disability can receive modest — but vital — benefits from the Social Security Disability Insurance program. If you meet the eligibility requirements, you will receive benefits.

Is Social Security Disability Insurance available to everyone?

For Social Security Disability Insurance to be available to you, you must both be disabled and have worked for a long enough period of time.

Your first step is to meet the work test. Based on Social Security work credits, you must earn a minimum amount of wages or self-employment income per year in order to qualify. Earning $1,730 in wages or self-employment income per year in 2024 is equivalent to earning one credit. A maximum of four credits can be earned per year. For example, when you earn $6,920 in 2024, you earn four credits.

A minimum of 40 credits is typically required, with 20 of them earned during the past 10 years prior to the year when you became disabled. There are also differences in the amount of Social Security credits necessary to meet the work test requirement depending on your age. Younger workers usually haven’t had enough time in the workforce to earn the full 40 credits.

• Under age 24: Earning 6 credits within a 3-year period when your disability began qualifies you for the work test.
• Age 24 to 31: A person may qualify if he or she has worked half the time between the ages of 21 and 31.
• Age 31 or older: For the 10-year period immediately preceding disability, you must earn at least 20 credits.

According to your age and when your disability began, review the Social Security Administration’s table to determine if you meet the duration of work test.

A third requirement is to be unable to work because of a medical condition that has been affecting you for at least one year, or one that will affect you for at least one year or lead to death. This means that you must not have a partial disability and meet the Social Security Administration’s definition of disability.

A fourth requirement is that you are under the full retirement age set by Social Security.

Depending on your work history, certain members of your family may also qualify for Social Security Disability Insurance benefits if you meet the requirements above.

Pro Tip:

When you file a single return, you may be required to include 50% of your SSDI benefits (or $32,000- $44,000 if you are married filing jointly) in your taxable income if your income is between $25,000 and $34,000. If your income exceeds $34,000 (or $44,000 if you are married filing jointly), you may need to include up to 85% of your SSDI benefits in your taxable income).

Is Social Security Disability Taxed in All States?

Social Security Disability benefits are not taxable in most states. The following states still tax disability benefits:

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

The laws for Social Security Disability Insurance vary from state to state, so talk to a lawyer. Depending on where you live, the tax rules may be similar to those of the Internal Revenue Service. An attorney or tax professional can help you determine if your Social Security benefits are taxable.

How Do Social Security Disability Back Payments Work?

Your income for the year might be increased if you receive “back payments” from the time when you were disabled before you received benefits. If a loved one died, you might receive a one-time death payment.

There is a possibility that a lump-sum payment will increase your income. However, you may be able to apply some of the Social Security benefits to previous years, which could reduce your taxable income.

How does Social Security Disability Insurance work?

As a general rule, your Social Security Disability Insurance benefits depend on the average lifetime earnings you earned before you became disabled. The more you earned over a longer period, the more you’ll receive. Disability benefits are calculated by the Social Security Administration based on the amount of your Social Security “covered earnings,” which are your past earnings subject to Social Security taxes.

Your benefits are determined by averaging your covered earnings over a 35-year period representing your top earning years. In order to determine your primary insurance amount (PIA), the Social Security Administration uses your average indexed monthly earnings (AIME). AIME serves as a base figure for calculating your Social Security Disability Insurance benefit.

A Social Security Disability Insurance benefit will not be affected if you receive other disability benefits from a private insurer. You can review your full covered earnings history by requesting a Social Security Statement from the Social Security Administration.

A person’s Social Security Disability Insurance benefits may be affected if they receive benefits from other government-sponsored programs, including workers’ compensation and temporary disability programs. Social Security Disability Insurance benefits are generally not reduced by Veterans Affairs (VA) or Supplemental Security Income (SSI). However, getting Social Security Disability Insurance may reduce your Supplemental Security Income benefits.

Certain conditions limit your overall benefit under the Social Security Disability Insurance program. You cannot receive more than 80% of your average earnings before you become disabled if you combine Social Security Disability Insurance with other government-sponsored disability programs. If you do, the SSA will reduce your benefits.