Disability payments are taxable only if your total income exceeds a certain threshold
Whether you owe federal income tax on your Social Security Disability Insurance (SSDI) payments depends on how much other income you have. If SSDI is your only income, you almost certainly will not owe tax. If you have earnings from work, pensions, interest, or other sources, part of your SSDI may become taxable.
The IRS uses a formula called "combined income" to decide this. Combined income includes your SSDI amount plus half of your SSDI plus any other income you report. If that total exceeds a base amount set by the IRS, you may have to include part of your SSDI as taxable income on your federal return.
The base amounts are $25,000 for single filers and $32,000 for married couples filing jointly. These thresholds have not changed since 1984, so they affect more people now than they did when they were set.
Key Takeaways
- SSDI is taxable only if your combined income (SSDI plus half your SSDI plus other income) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
- If SSDI is your only income source, you will not owe federal income tax on it, though you may still need to file a return to claim the Earned Income Tax Credit or other refundable credits.
- State income tax rules vary: some states do not tax SSDI at all, while others follow federal rules or have different thresholds.
- You can ask the Social Security Administration to withhold federal income tax from your monthly SSDI payment to avoid owing a large amount at tax time.
How the IRS calculates whether your SSDI is taxable
The calculation starts with your combined income. To find yours, add:
- Your adjusted gross income (wages, self-employment income, interest, dividends, pensions, and other sources)
- Plus half of your SSDI benefit amount
- Plus any tax-exempt interest (such as interest from municipal bonds)
If that total is below $25,000 (single) or $32,000 (married filing jointly), none of your SSDI is taxable. If it exceeds those amounts, up to 85 percent of your SSDI may become taxable income, depending on how far over the threshold you go.
The formula has two tiers. If your combined income is between the base amount and $9,000 more (for single filers), up to 50 percent of your SSDI becomes taxable. If your combined income exceeds the second tier ($34,000 for single filers), up to 85 percent becomes taxable. Married couples filing jointly have thresholds of $44,000 and $54,000 for the second tier.
This means that even if you are over the threshold, not all of your SSDI becomes taxable—the IRS limits the taxable portion to prevent you from paying tax on more than 85 percent of your benefit.
When you have earned income from work
If you are working while receiving SSDI, your wages count toward combined income. This is one of the most common reasons SSDI becomes taxable. Even part-time or seasonal work can push you over the threshold, especially if you also have other income like a pension or investment returns.
The Social Security Administration also has a separate rule called the substantial gainful activity (SGA) limit, which is different from the tax rule. If your work earnings exceed the SGA limit ($1,550 per month in 2024, though this amount changes yearly), Social Security may end your SSDI benefits. The tax rule and the SGA rule are separate—you can owe tax on SSDI without losing benefits, and vice versa.
If you are working and receiving SSDI, you should report your earnings to Social Security and also factor them into your tax calculation. Your employer will send you a W-2 form showing your wages, which you will report on your tax return.
State income tax on SSDI
Federal tax rules do not explore to state income tax. Each state sets its own rules about whether SSDI is taxable at the state level.
Most states do not tax SSDI at all. However, some states follow the federal rule and tax SSDI the same way the IRS does. A few states have their own thresholds or rules that differ from federal law. For example, some states tax SSDI only if your income exceeds a higher threshold than the federal one.
You will need to check your state's tax authority website or speak with a tax preparer who knows your state's rules. The Social Security Administration's website lists state tax treatment of SSDI, but the rules change, so verify the current rule before filing.
How to handle taxes if you receive SSDI
If you think your SSDI might be taxable, you have two main options: pay estimated tax quarterly, or ask Social Security to withhold federal income tax from your monthly benefit.
To request withholding, complete Form W-4V and send it to your local Social Security office or mail it to Social Security. You can choose to have 10, 15, 25, or 35 percent of your monthly benefit withheld. This is simpler than making quarterly estimated payments and helps you avoid owing a large amount when you file your return.
If you do not request withholding and you owe tax, you will have to pay it when you file your return in April. Some people set aside a portion of each SSDI check to cover the tax they expect to owe.
Filing a tax return when SSDI is your only income
If SSDI is your only income and it is below the taxable threshold, you are not required to file a federal income tax return. However, you may want to file anyway if you are may have access to to refundable credits like the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit.
These credits can result in a refund even if you owe no tax. If you have dependents or earned income from work, you may may have access to for one of these credits. Filing a return is the only way to claim them.
You can file by mail using Form 1040 and the appropriate schedules, or use free tax software if your income is below a certain threshold. The IRS website lists free filing options each year.
What to do if you receive a notice about SSDI and taxes
Social Security sends Form SSA-1099 to all beneficiaries each January. This form shows the total SSDI you received in the previous year. You will use this amount to calculate your combined income and determine whether any of your SSDI is taxable.
If the IRS sends you a notice saying your SSDI is taxable and you disagree, you can respond to the notice with documentation of your income. Keep records of all income sources, including bank statements showing interest, pension statements, and W-2 forms from any work you did.
If you are unsure whether you calculated your taxes correctly, you can contact the IRS directly or work with a tax preparer. Many community organizations offer free tax help to people with low to moderate income.
Frequently Asked Questions
Do I have to file a tax return if I only receive SSDI?
Not if SSDI is your only income and it is below the taxable threshold ($25,000 for single filers). However, you should file if you have other income, earned income from work, or if you may be may have access to to refundable tax credits like the Earned Income Tax Credit.
What if I have a pension and SSDI—will my SSDI be taxable?
Possibly. Your pension counts as income in the combined income calculation. Add your pension, half your SSDI, and any other income. If the total exceeds $25,000 (single) or $32,000 (married), part of your SSDI becomes taxable. The exact amount depends on how far over the threshold you are.
Can I reduce my SSDI taxes by working less?
Yes. If your work earnings are pushing you over the combined income threshold, earning less would lower your combined income and reduce or eliminate SSDI taxation. However, remember that the Social Security Administration also has the SGA limit—if your earnings exceed that, your benefits may end regardless of taxes.
What is the difference between the SGA limit and the tax threshold?
The SGA limit ($1,550 per month in 2024) is a Social Security rule that can end your benefits if you earn too much. The tax threshold ($25,000 combined income for single filers) is an IRS rule that determines whether you owe tax. You can exceed one without triggering the other, but both explore to you.
If I request tax withholding from my SSDI, will I still owe taxes?
Withholding reduces the amount you owe, but it may not eliminate it entirely. The amount withheld depends on what percentage you choose (10, 15, 25, or 35 percent) and your total tax liability. You may still owe a small amount or receive a refund when you file, depending on your actual tax situation.