States That Tax SSDI

Thirteen states tax Social Security Disability Insurance (SSDI) benefits as income. Those states are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Illinois taxes SSDI only for people over 61. The tax treatment depends on your total income, filing status, and whether you claim other deductions — not on the SSDI amount alone.

If you live in one of these states, you will owe state income tax on part or all of your SSDI benefits, even though federal law does not tax SSDI for most people. The amount you owe varies widely. Some states tax SSDI the same way they tax other income. Others use a formula based on your total income and only tax benefits above a certain threshold.

If you live in any other state, your SSDI is not subject to state income tax. This includes states with no income tax (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming) and states that do tax income but have chosen not to tax SSDI (such as California, New York, and Pennsylvania).

Key Takeaways

  • Thirteen states plus Illinois (for recipients over 61) tax SSDI as income, while the remaining states do not.
  • The amount of SSDI subject to tax depends on your total income for the year, not just the SSDI amount.
  • Each state uses its own formula to calculate how much SSDI is taxable, so the tax owed in one state may differ from another.
  • You may owe state tax on SSDI even if you do not owe federal tax, because the federal rules and state rules are separate.

How Each State Calculates SSDI Tax

States that tax SSDI do not all use the same method. Some states follow the federal formula, which looks at your combined income (SSDI plus other income like wages or pensions) and only taxes SSDI above a certain level. Other states tax SSDI as ordinary income without a threshold.

Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia each have their own rules. For example, some states allow you to subtract SSDI from your taxable income up to a certain amount before calculating tax. Others tax SSDI at the same rate as wages or interest income.

Illinois is unique: it taxes SSDI only if you are 61 or older and only if your total income exceeds a threshold set by the state. If you are under 61 in Illinois, SSDI is not taxed.

Because the rules vary, you should check your specific state's tax department website or contact them directly to learn how much of your SSDI will be taxed. The Social Security Administration does not calculate state tax for you — that is your state's responsibility.

When You Might Owe Tax on SSDI

You may owe state tax on SSDI if you live in one of the thirteen taxing states (or Illinois, if you are over 61) and your total income exceeds your state's threshold. Total income usually means SSDI plus wages, self-employment income, pensions, interest, dividends, and other sources.

Even if you do not owe federal tax on your SSDI, you may still owe state tax. The federal government does not tax SSDI for most people, but states set their own rules. A person with low income might owe no federal tax but still owe state tax in Colorado or Connecticut, for example.

If you have other income sources — such as a part-time job, a pension, or investment income — your total income is higher, and you are more likely to owe state tax on SSDI. Some states use a formula that taxes only the portion of SSDI that exceeds a certain combined income level.

How to Report SSDI on Your State Tax Return

When you file your state income tax return, you will report SSDI on a line designated for Social Security or disability benefits. The exact line number and instructions depend on your state. Your state tax form or instructions will tell you where to enter the amount.

Social Security sends you a Form SSA-1099 each January showing the total SSDI you received in the previous year. Use this form to report the correct amount on your state return. Do not estimate or round the number.

If you use tax software or work with a tax preparer, tell them you receive SSDI and live in a state that taxes it. They will know which line to use and how to calculate the taxable portion based on your state's rules. If you prepare your return yourself, your state's tax department website has instructions and worksheets.

Some states allow you to claim deductions or credits that reduce the amount of SSDI subject to tax. Check your state's instructions to see whether you may have access to for any of these.

States That Do Not Tax SSDI

Thirty-seven states do not tax SSDI benefits. This group includes all nine states with no income tax at all (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming) and twenty-eight states that have income tax but have chosen not to tax SSDI.

If you live in a non-taxing state, you will not owe state income tax on your SSDI, regardless of how much other income you have. You may still owe federal tax on SSDI if your combined income is high enough, but that is a separate matter from state tax.

If you move from a taxing state to a non-taxing state, or vice versa, your state tax situation changes when ready. You should update your address with Social Security and check your new state's tax rules before filing your next return.

What to Do If You Are Unsure About Your State's Rules

Contact your state's department of revenue or taxation directly. Most states have a website with instructions for reporting SSDI, a phone line, or both. You can also ask the Social Security Administration, though they will direct you to your state for the specific answer.

If you use a tax preparer or accountant, they can tell you whether you owe state tax on SSDI and how much. This is especially useful if you have other income sources or if you moved during the year.

Keep your Form SSA-1099 and any state tax instructions or worksheets related to SSDI. If your state ever questions your return, these documents show that you reported SSDI correctly based on the rules in effect that year.

Frequently Asked Questions

Do I have to pay federal tax on SSDI?

Most people do not. The federal government does not tax SSDI for most recipients. You may owe federal tax only if your combined income (SSDI plus other income) is very high. Your state's rules are separate from federal rules.

If I move to a different state, do I owe back taxes?

No. You owe state tax only for the year you lived in that state. If you moved from a taxing state to a non-taxing state in July, you owe tax to the first state only for January through June. File a part-year return in each state if required.

Can I deduct SSDI from my state taxable income?

Some states allow a deduction or exemption for SSDI, but not all. Check your state's tax instructions or contact your state's tax department. If your state allows it, the deduction will be shown on your state tax form or worksheet.

What if I did not know my state taxes SSDI and did not report it?

Contact your state's tax department and file an amended return for the years you missed. Most states have a important date to file amended returns, usually three to four years back. Filing voluntarily is better than waiting for the state to contact you.

Does SSDI count as income for other state programs?

Yes. SSDI is counted as income for programs like Medicaid, food information, and housing support in most states. The income limits for these programs are separate from tax rules, so you may owe state tax on SSDI but still may have access to for other information.