You may have to report SSDI benefits as income on your federal tax return, but most people do not owe tax on them

Whether you report Social Security Disability Insurance (SSDI) on your tax return depends on your total income for the year. SSDI itself is not automatically taxable, but if you have other income—wages, self-employment earnings, interest, dividends, or certain other sources—a portion of your benefits may become taxable. The IRS uses a formula based on your "combined income" to determine this.

If SSDI is your only income and you have no other earnings, you typically do not report it on your tax return and do not owe federal income tax on it. However, if you have other income sources, you must file a return and calculate whether any of your SSDI is taxable. Some people file even when they do not owe tax, because they may be due a refund from taxes withheld on wages or self-employment income.

Key Takeaways

  • SSDI benefits are not taxable if they are your only income, but you must report them if you have wages, self-employment income, or other earnings above certain thresholds.
  • The IRS uses "combined income"—half your SSDI plus all other income—to decide if any benefits are taxable; the threshold is $25,000 for single filers and $32,000 for married filing jointly.
  • You do not have to claim SSDI on your return if you have no other income, but you may want to file anyway if taxes were withheld from wages or you are due a refund.
  • Some states tax SSDI even when the federal government does not, so check your state's rules separately.
  • If you work while receiving SSDI, you must report all wages and may owe tax on a portion of your benefits.

How the IRS decides if your SSDI is taxable

The IRS calculates your "combined income" by taking half of your SSDI benefits and adding all your other income—wages, self-employment earnings, interest, dividends, rental income, and certain other sources. This combined income figure determines whether any of your SSDI becomes taxable.

If your combined income is below $25,000 (or $32,000 if you are married filing jointly), none of your SSDI is taxable. If your combined income is between $25,000 and $34,000 (or $32,000 and $44,000 for married filing jointly), up to 50 percent of your benefits may be taxable. If your combined income exceeds $34,000 (or $44,000 for married filing jointly), up to 85 percent of your benefits may be taxable. The exact amount depends on how far above the threshold you are.

This formula applies to federal taxes only. Some states—including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont—tax SSDI benefits even when the federal government does not. Check your state's tax rules or contact your state revenue department to learn whether you owe state tax on your benefits.

When you must file a return even if you do not owe tax

You are not required to file a federal return if SSDI is your only income. However, you should file if you had any wages, self-employment income, or other earnings during the year, because you may be due a refund. If your employer withheld federal income tax from your paychecks, you can only recover that money by filing a return.

You should also file if you are due the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit, even if you do not owe tax. These credits can result in a refund, and you must file to claim them. If you are unsure whether you should file, the IRS provides a filing requirements tool on its website, or you can contact a tax professional or a free tax preparation service in your area.

Reporting SSDI when you work

If you are working while receiving SSDI, you must report all your wages on your tax return. Work incentive programs like the Plan to Achieve Self-Support (PASS) and Impairment Related Work Expenses (IRWE) may reduce the income that counts toward your SSDI benefit amount, but they do not change what you report to the IRS for tax purposes. You report your full wages, and the IRS then applies the combined income formula to determine if any SSDI is taxable.

Many people receiving SSDI work part-time or use work incentives to test their ability to work without losing benefits. If you are in this situation, keep records of all wages, self-employment income, and any work-related expenses you claim under PASS or IRWE. You will need these records both for your SSDI work incentive reporting and for your tax return.

What documents you need to file

To file your tax return, you will need your Social Security number, your SSDI benefit statement (Form SSA-1099-SM), and documentation of any other income. The Social Security Administration mails Form SSA-1099-SM to all beneficiaries by January 31 each year. This form shows the total SSDI you received in the previous year and is required to file your return accurately.

If you have wages, you will receive a W-2 from your employer. If you are self-employed, you will need to calculate your net self-employment income and may need to file Schedule C (Form 1040). If you have interest, dividends, or other investment income, you will receive a 1099 form from the financial institution or investment company. Gather all these documents before you begin preparing your return.

Using free tax preparation services

If your income is below a certain threshold (which changes each year), you may be able to use the IRS Free File program. This program offers free tax software and preparation through participating companies. You can find the Free File tool on the IRS website at irs.gov.

You can also find free in-person tax help through the Volunteer Income Tax information (VITA) program, which operates at libraries, community centers, and other locations nationwide. VITA volunteers are trained to help people with low to moderate income, including those receiving SSDI. To find a VITA site near you, visit the IRS website or call 211 to be referred to a local tax information program.

State tax considerations

Most states do not tax SSDI benefits, but some do. The states that tax SSDI are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. If you live in one of these states, you may owe state income tax on your SSDI even if you do not owe federal tax.

State tax rules vary. Some states use the same combined income thresholds as the federal government; others use different thresholds or tax SSDI differently. Contact your state's revenue or tax department to learn the specific rules for your situation, or ask a tax professional who is familiar with your state's tax code.

Frequently Asked Questions

Do I have to report SSDI if it is my only income?

No. If SSDI is your only income and you have no other earnings, you do not have to file a federal tax return. However, you may want to file if taxes were withheld from wages in a previous year or if you are due a refund through the Earned Income Tax Credit or Child Tax Credit.

What if I work part-time while receiving SSDI?

You must report all wages on your tax return. The IRS will calculate your combined income (half your SSDI plus all wages) and determine if any benefits are taxable. Work incentive programs reduce what counts toward your SSDI benefit, but they do not change what you report to the IRS.

Can I owe tax on SSDI in one state but not another?

Yes. The federal government does not tax SSDI for most people, but 11 states tax it under their own rules. If you live in Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, or Vermont, check your state's tax rules or contact your state revenue department.

Where do I get Form SSA-1099-SM?

The Social Security Administration mails Form SSA-1099-SM to all SSDI beneficiaries by January 31 each year. If you do not receive it, you can create a my Social Security account and view your tax information online, or call Social Security at 1-800-772-1213 to request a replacement form.

What if I cannot afford to pay tax on my SSDI?

If you owe tax, the IRS offers payment plans and may be able to reduce or eliminate penalties if you have a valid reason for not paying on time. Contact the IRS directly or work with a tax professional to discuss your options. You can also find free tax help through VITA or by calling 211 for a referral to a local tax information program.