What tax credits are available to SSDI recipients

If you receive SSDI, you may be able to claim certain tax credits when you file your federal income tax return. The main ones are the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, and the Credit for the Elderly and Disabled. Whether you can claim any of these depends on your income level, your filing status, and what kind of income you have — not straightforward on the fact that you receive SSDI.

SSDI payments themselves are not taxable income, which means they do not count toward your income when you calculate whether you owe taxes. However, if you have other income — from work, a pension, interest, or dividends — you may owe taxes on that income and may also be able to claim credits that reduce what you owe.

Key Takeaways

  • SSDI payments are not taxable, but other income you receive may be, and tax credits are based on your total income from all sources.
  • The Earned Income Tax Credit can reduce your tax bill or result in a refund if you have work income and your total income is below a certain threshold.
  • The Credit for the Elderly and Disabled is available to people age 65 or older, or under 65 with a permanent disability, if your income and assets fall below set limits.
  • You must file a tax return to claim any of these credits, even if you would not otherwise be required to file.
  • The IRS does not automatically know you receive SSDI, so you need to report your income accurately on your return.

The Earned Income Tax Credit (EITC)

The EITC is a credit for people with low to moderate work income. If you work and earn wages or self-employment income, you may be able to claim it. The credit amount depends on how much you earned, whether you have dependents, and your filing status. The IRS publishes income limits each year, and they vary by filing status and number of dependents.

The EITC is valuable because it can reduce your tax bill to zero and may result in a refund — meaning the IRS sends you money. You do not have to owe taxes to claim it. If you have SSDI income and also work, your SSDI does not count toward the income limit, only your wages or self-employment income count.

To claim the EITC, you must file a tax return. You can file on your own, through a tax preparer, or through a free tax preparation program. The IRS offers free filing options through its Free File program if your income is below a certain level.

The Credit for the Elderly and Disabled

This credit is designed for people who are age 65 or older, or who are under 65 and permanently and totally disabled. If you receive SSDI, you are considered permanently and totally disabled for purposes of this credit. The credit amount is up to $750 if you file as single, or up to $1,125 if you file as married filing jointly, though the actual amount depends on your income and assets.

To claim this credit, your income must be below a set limit. The limit varies depending on your filing status and whether you are age 65 or older or under 65. Additionally, you cannot have more than $7,500 in nontaxable income (such as nontaxable SSDI payments) if you are single, or $10,000 if you are married filing jointly. These limits can make the credit unavailable if your SSDI payments are high.

You claim this credit on Schedule R, which you attach to your Form 1040. You must file a tax return to claim it, even if you have no tax liability.

The Child and Dependent Care Credit

If you pay someone to care for a child under age 13, or for a spouse or dependent who is unable to care for themselves, you may be able to claim this credit. The credit covers expenses you paid so that you could work or look for work. It does not cover expenses for school or overnight camp.

The credit is worth up to 20 to 35 percent of your care expenses, depending on your income. The maximum expenses you can claim are $3,000 per year if you have one dependent, or $6,000 if you have two or more dependents. You claim this credit on Form 2441, which you attach to your Form 1040.

If you receive SSDI and do not work, this credit would not explore to you unless you are in a work incentive program that counts as work for tax purposes. Talk to your Social Security work incentives planning counselor if you are unsure whether your situation qualifies.

How SSDI income affects your tax situation

SSDI payments do not count as income for federal tax purposes. This means they do not push you into a higher tax bracket, and they do not reduce the amount of tax credits you can claim. However, if you have other income — from a job, a pension, rental property, or investments — that income does count, and it may affect your tax liability and your may be able to access for certain credits.

Some people who receive SSDI also work. If you work, your wages are taxable income. Your SSDI payments remain nontaxable. When you file your tax return, you report only your wages, not your SSDI, and you calculate your tax and credits based on your wages and any other taxable income.

If you are unsure whether you have to file a tax return, the IRS has a tool on its website called the Interactive Tax Assistant that can help you determine your filing requirement based on your income, age, and filing status.

What documents you need to claim tax credits

To claim any tax credit, you need to file a complete and accurate tax return. You will need your Social Security number, your filing status, information about any dependents, and documentation of your income. If you have work income, you will receive a W-2 form from your employer or a 1099 form if you are self-employed.

For the Credit for the Elderly and Disabled, you do not need to submit proof of disability — the IRS accepts your SSDI award letter as evidence. Keep a copy of your SSDI award letter with your tax records in case the IRS asks questions later.

For the Child and Dependent Care Credit, you need the name, address, and tax identification number of the person or facility that provided the care. If you cannot obtain this information, you cannot claim the credit.

Working with a tax preparer or the IRS

If you are not comfortable preparing your own tax return, you can work with a tax preparer or accountant. Many offer free or low-cost services. The IRS also runs the Volunteer Income Tax information (VITA) program, which provides free tax preparation to people with low to moderate income. You can find a VITA site near you on the IRS website.

If you have questions about whether you owe taxes or whether you can claim a credit, you can call the IRS directly at 1-800-829-1040. The IRS also has detailed publications about each tax credit on its website, including Publication 596 (Earned Income Credit), Publication 524 (Credit for the Elderly and Disabled), and Publication 503 (Child and Dependent Care Expenses).

Frequently Asked Questions

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

No. If SSDI is your only income, you do not have to file a federal income tax return. However, if you have other income — from work, a pension, or investments — you may have to file. Use the IRS Interactive Tax Assistant to check your specific situation.

Can I claim the Earned Income Tax Credit if I receive SSDI?

Yes, if you have work income. Your SSDI does not count toward the income limit for the EITC. Only your wages or self-employment income count. If your work income is below the limit for your filing status and dependents, you may be able to claim the credit.

What if I worked part of the year and then started receiving SSDI?

You report only the wages you earned before you started receiving SSDI. SSDI payments do not count as income. If your total wages for the year are below the EITC income limit, you may still be able to claim the credit based on those wages.

Does claiming a tax credit affect my SSDI benefits?

No. Tax credits do not affect your SSDI payment amount. They are separate from the Social Security system. However, if you have work income, that income may affect your benefits under Social Security's work incentive rules — talk to your local Social Security office about how work affects your specific situation.

Where do I find my SSDI award letter to prove I am disabled for the tax credit?

Your award letter was mailed to you when your SSDI was approved. You can also request a replacement by calling Social Security at 1-800-772-1213 or by visiting your local Social Security office. You can also create a my Social Security account online at ssa.gov to view and print your award letter.