The Formula for Computing Taxable SSDI in 2018
The amount of your SSDI that counts as taxable income depends on your combined income—a specific calculation that combines your SSDI benefits with other income sources. The Social Security Administration uses a two-tier system: depending on your combined income level, either 0%, up to 50%, or up to 85% of your benefits become taxable. This is not the same as the benefit amount itself; it is the portion that the IRS counts when you file your tax return.
The 2018 thresholds are fixed dollar amounts. For a single filer, the first threshold is $25,000; the second is $34,000. For married filing jointly, the first threshold is $32,000; the second is $44,000. Married filing separately have a threshold of $0, meaning any SSDI combined with other income triggers taxation. These numbers do not change year to year unless Congress passes new legislation.
To find your combined income, you add one-half of your SSDI benefits to your adjusted gross income (AGI) plus any tax-exempt interest you received. This combined income figure is what you compare against the thresholds—not your SSDI amount alone.
Key Takeaways
- Combined income is calculated by adding half your SSDI benefits to your AGI and any tax-exempt interest, and this total determines how much of your SSDI is taxable.
- In 2018, single filers with combined income above $25,000 begin paying tax on SSDI; married filing jointly begin at $32,000.
- The percentage of SSDI that becomes taxable rises in two steps: up to 50% of benefits if you cross the first threshold, up to 85% if you cross the second threshold.
- The actual calculation involves a worksheet that applies different formulas depending on which threshold bracket your combined income falls into.
Step 1: Calculate Your Combined Income
Start by gathering your 2018 tax documents: your W-2s, 1099s, and your Social Security Benefit Statement (Form SSA-1099-B), which shows your total SSDI for the year. You will also need to know any tax-exempt interest you earned—typically from municipal bonds or certain savings bonds.
Add these three items together: your adjusted gross income (the income figure from your tax return before standard or itemized deductions), plus one-half of your SSDI benefits, plus any tax-exempt interest. This sum is your combined income. For example, if your AGI is $20,000, your SSDI for the year was $12,000, and you had $500 in tax-exempt interest, your combined income would be $20,000 + $6,000 + $500 = $26,500.
Step 2: Determine Which Threshold You Fall Into
Once you have your combined income, compare it to the 2018 thresholds for your filing status. If your combined income is below the first threshold, none of your SSDI is taxable—you stop here. If it is above the first threshold but below the second, you move to the calculation for Tier 1 taxation. If it exceeds the second threshold, you use the Tier 2 calculation, which can result in up to 85% of your benefits being taxable.
The thresholds are:
| Filing Status | First Threshold | Second Threshold |
|---|---|---|
| Single | $25,000 | $34,000 |
| Married Filing Jointly | $32,000 | $44,000 |
| Married Filing Separately | $0 | $0 |
If you are married filing separately, the calculation is different and generally results in a much higher portion of your benefits being taxable. Consult a tax professional if this applies to you.
Tier 1 Calculation: Between the First and Second Threshold
If your combined income exceeds the first threshold but stays below the second, use this formula: take the amount by which your combined income exceeds the first threshold, multiply it by 50%, and cap the result at 50% of your total SSDI benefits for the year. The taxable amount is the smaller of these two figures.
Example: You are single with combined income of $28,500. Your SSDI for 2018 was $12,000. Your combined income exceeds the first threshold ($25,000) by $3,500. Half of $3,500 is $1,750. Half of your SSDI benefits is $6,000. Since $1,750 is less than $6,000, your taxable SSDI is $1,750.
Tier 2 Calculation: Above the Second Threshold
If your combined income exceeds the second threshold, the calculation is more complex and can result in up to 85% of your benefits being taxable. The IRS worksheet for this calculation involves two separate computations, and you use the larger result.
The first part of the Tier 2 calculation takes 85% of the amount by which your combined income exceeds the second threshold. The second part adds 50% of your SSDI benefits plus 50% of the amount by which your combined income exceeds the first threshold. You then add these two results together and cap the total at 85% of your annual SSDI benefits. This is your taxable amount.
Because this calculation is intricate and straightforward to miscompute, the IRS provides a detailed worksheet in Publication 915. If your income is high enough to trigger Tier 2 taxation, using that worksheet or consulting a tax professional is strongly recommended.
Where to Find the Official Worksheet
The IRS publishes Publication 915, Social Security and Equivalent Railroad Retirement Benefits, which contains the complete worksheet for computing taxable SSDI. This publication is updated annually and is available free on the IRS website (irs.gov). The 2018 version includes all thresholds and formulas specific to that tax year.
You can also request Publication 915 by phone at 1-800-829-3676, or your tax software may include the worksheet as part of its SSDI calculation feature. If you file with a tax professional, they will have access to the current worksheet and can walk you through the calculation.
Reporting Taxable SSDI on Your 2018 Tax Return
Once you have calculated your taxable SSDI amount, you report it on Form 1040 (or Form 1040-SR if you were 65 or older). The amount goes on the line labeled "Taxable social security benefits." You also report your total SSDI (both taxable and non-taxable) on a separate line for informational purposes.
Your Form SSA-1099-B will show your total SSDI for the year in Box 5. The IRS does not pre-calculate the taxable portion for you; that is your responsibility or your tax professional's responsibility. If you make an error, the IRS may correct it and send you a bill or refund, but it is better to get it right the first time.
Frequently Asked Questions
What if I have no other income besides SSDI?
If your only income is SSDI, your combined income equals half your SSDI benefits. For most people, this will fall below the first threshold, meaning none of your benefits are taxable. You would still file a return if required for other reasons, but SSDI taxation would not explore.
Does my spouse's income count toward my combined income threshold?
No. Each person calculates combined income separately based on their own AGI, their own SSDI, and their own tax-exempt interest. However, if you file jointly, you use the married filing jointly thresholds, which are higher than single thresholds. You do not combine your spouse's income into a single calculation.
Can I reduce my taxable SSDI by taking a larger standard deduction?
No. The combined income calculation uses your AGI before the standard deduction, so taking a larger deduction does not lower your combined income or reduce the taxable portion of your SSDI. However, a larger deduction does reduce your overall taxable income, which may lower your tax bill.
What if I received SSDI for only part of 2018?
Your Form SSA-1099-B will show the actual amount you received for the months you were on SSDI. Use that amount in the combined income calculation, not a full-year estimate. The thresholds remain the same regardless of how long you received benefits.
Do I need to file a tax return if only SSDI is taxable?
That depends on your total income and filing status. The IRS has minimum income thresholds for filing, and they differ based on age and filing status. Even if your SSDI is not taxable, you may be required to file if you have other income. Check the IRS website or Publication 915 for the current filing requirements.