Helping People With Disabilities Nationwide

Can my Social Security disability income be taxed?

On Behalf of | Jul 3, 2024 | SSD - Social Security Disability |

When you’re grappling with a disability that prevents you from working, Social Security Disability Insurance (SSDI) can be a lifeline. But as you navigate this new chapter of your life, you might find yourself wondering: “Do I have to pay taxes on these benefits?”

It’s a common question and one that can cause a lot of stress for folks who are already dealing with health challenges and financial uncertainty. Not everyone who receives SSDI has to pay taxes on their benefits. Having knowledge of tax implications can help you better manage your finances and avoid any unnecessary obligations come tax season.

The taxation threshold

The Internal Revenue Service (IRS) employs a specific formula to determine whether your Social Security benefits are taxable. This calculation is based on your “combined income,” which includes:

  • Your adjusted gross income
  • Nontaxable interest
  • Half of your Social Security benefits

For individual filers, if your combined income exceeds $25,000, a portion of your benefits may be subject to taxation. For married couples filing jointly, this threshold increases to $32,000. These thresholds have remained unchanged since the 1980s despite inflation.

Calculating your taxable benefits

If your income exceeds these thresholds, the taxable portion of your Social Security benefits is determined as follows:

  • For individuals with a combined income between $25,000 and $34,000 or couples between $32,000 and $44,000, up to 50% of benefits may be taxable.
  • For those with combined incomes exceeding $34,000, or $44,000 for couples, up to 85% of benefits may be taxable.

These percentages represent the maximum amount of your benefits that could be taxed, not the tax rate itself.

State-level taxation considerations

While federal taxation of Social Security benefits is uniform across the United States, state-level taxation varies. As of now, 13 states might take a bite out of your disability check. This can create a double tax burden for retirees in these states, making it even more important to understand your local tax landscape.

If you live in one of these states, you’ll need to factor in both federal and state taxes when budgeting. Again, the variation of rules in these states will require you to have better legal knowledge of your local area to know what its level of taxation entails. You, therefore, may benefit from exploring more about how the legal strategies can be optimized for your situation.


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