Whether your SSDI is taxed depends on your total income, not just your benefits

The Social Security Administration does not automatically withhold taxes from your SSDI check. Instead, the IRS decides whether you owe tax based on your combined income—which includes your SSDI, wages, interest, pensions, and other money you received that year. If your combined income exceeds a certain threshold, part of your SSDI becomes taxable. If it stays below that threshold, your SSDI is not taxed at all.

The threshold is low. For a single person with no other dependents, you hit the taxable range at just $25,000 in combined income. For a married couple filing jointly, it is $32,000. These numbers have not changed since 1984, which means more people cross into the taxable range every year even if their actual income stays flat.

You do not have to wait until tax time to know whether you will owe. You can calculate it yourself right now using the IRS worksheet, or ask the Social Security Administration to estimate your tax liability for the year.

Key Takeaways

  • Your SSDI is taxed only if your combined income—SSDI plus all other income—exceeds $25,000 (single) or $32,000 (married filing jointly).
  • Combined income includes wages, self-employment income, interest, dividends, pensions, rental income, and other sources, not just SSDI.
  • If you will owe tax, you can arrange to have the IRS withhold it from your SSDI check each month, or pay estimated tax quarterly.
  • The IRS publishes a worksheet each year that shows exactly how much of your SSDI is taxable based on your income.

How the IRS calculates which part of your SSDI is taxable

The IRS uses a two-step formula. First, it adds up your combined income: your SSDI amount plus one half of your SSDI plus all your other income (wages, interest, pensions, rental income, and so on). Then it compares that total to a threshold.

If your combined income is below $25,000 (single) or $32,000 (married filing jointly), none of your SSDI is taxed. If it is above that threshold but below a second threshold ($34,000 single, $44,000 married), up to 50 percent of your SSDI becomes taxable. If it is above the second threshold, up to 85 percent of your SSDI becomes taxable.

The formula is complicated enough that the IRS provides a worksheet in Publication 915, which comes with the tax instructions each year. You can also use the Social Security Administration's online calculator or call them to request a tax estimate.

What counts as income for the tax calculation

Combined income includes almost everything you received money for during the year. Wages from a job count. Self-employment income counts. Interest from a savings account counts. Dividends from stocks count. Rental income counts. Pensions count. Distributions from an IRA or 401(k) count. Even some nontaxable income—like municipal bond interest—counts toward the combined income threshold, which is why the threshold is so straightforward to cross.

A few things do not count: Supplemental Security Income (SSI) does not count. Workers' compensation does not count. Veterans benefits do not count. Gifts do not count. The return of your own principal from an investment does not count. But almost everything else does.

If you have a spouse and file jointly, you combine both of your incomes. If you are married but file separately, the rules are much harsher—you may owe tax on your SSDI even if your combined income is very low. Married couples filing separately should speak to a tax professional before filing that way.

Arranging to have tax withheld from your SSDI check

If you know you will owe tax, you have two choices: you can have the IRS withhold it from your SSDI check each month, or you can pay estimated tax quarterly.

To set up withholding, you fill out Form W-4V (Voluntary Withholding Request) and send it to your local Social Security office or mail it to the address on the form. You choose a withholding rate: 7 percent, 10 percent, 15 percent, or 25 percent of your SSDI. The Social Security Administration will then reduce your monthly check by that amount and send it to the IRS.

Withholding is simpler than estimated tax payments because it happens automatically each month. But it only works if you have SSDI income. If most of your income comes from wages or a pension, you may need to adjust withholding on that income instead, or make estimated tax payments.

Filing your tax return when you receive SSDI

You must file a federal tax return if your combined income exceeds the threshold for your filing status. You file the same way anyone else does: Form 1040 (the main return) plus Schedule 1 if you have other income, plus any other schedules your situation requires.

Your SSDI amount appears on a Form SSA-1099 that the Social Security Administration mails to you by January 31 each year. You attach that form to your tax return. The IRS uses it to cross-check your reported income.

If you did not have enough tax withheld during the year, you will owe the difference when you file. If you had too much withheld, you will receive a refund. If you did not have any tax withheld and you owe, you can pay when you file or set up a payment plan with the IRS.

State income tax on SSDI

Most states do not tax SSDI. Thirteen states tax SSDI under the same rules as the federal government: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Two states—Illinois and Mississippi—have special rules that may tax SSDI in limited situations.

If you live in one of these states, you may owe state income tax on part of your SSDI even if you do not owe federal tax. Check your state's tax agency website or call them to find out whether you need to file a state return and what your threshold is.

What to do if you cannot pay the tax you owe

If you file your return and owe tax but cannot pay it all at once, you have options. You can request a short-term extension to pay (up to 120 days) by calling the IRS. You can set up an installment agreement to pay over time—the IRS charges a fee and interest, but the monthly payment is usually small. You can request an offer in compromise if your financial situation is genuinely dire, though the IRS rarely accepts these.

Do not ignore a tax bill. The IRS can offset your SSDI check to collect what you owe, which means your monthly benefit will be reduced. If you think you cannot pay, contact the IRS before they contact you. The phone number is on your tax return or on the IRS website.

Frequently Asked Questions

Do I have to file a tax return if I only receive SSDI?

Only if your combined income exceeds $25,000 (single) or $32,000 (married filing jointly). If your SSDI is your only income and it is below that threshold, you do not have to file. But if you had tax withheld, you should file anyway to get a refund.

What if I work part-time and also receive SSDI?

Your wages count toward combined income. If your wages plus your SSDI plus any other income exceeds the threshold, part of your SSDI becomes taxable. You may want to increase withholding on your wages to cover the tax on your SSDI.

Can I reduce my tax by not cashing my SSDI check some months?

No. The IRS counts SSDI as income in the year it was due to you, whether you actually cashed the check or not. You cannot avoid the tax by leaving money in your account.

Will the IRS take my SSDI to pay other debts?

The IRS can offset your SSDI to collect back taxes, but other creditors generally cannot. Student loan servicers can offset SSDI in some cases. Child support and spousal support can also result in offsets. But credit card companies, medical debt collectors, and other private creditors cannot touch SSDI.

How do I know if I had enough tax withheld?

Use the IRS worksheet in Publication 915 to calculate your tax liability, then compare it to the amount withheld on your Form SSA-1099. If the withholding is less than the liability, you will owe when you file. If it is more, you will receive a refund.