Is SSDI Taxable? It Depends

Getting approved for disability benefits is a huge financial relief if you can’t work due to an injury or medical condition. But will you receive the entire amount stated in your award letter? Or will you have to pay taxes for your benefits? Is SSDI taxable?

The short answer is yes, SSDI benefits are taxable. The IRS considers it as part of your household income. But if you have limited or no other sources of income, you most likely won’t have to pay any taxes on your disability benefits.

In fact, only about a third of SSDI recipients pay taxes on their benefits. Besides, even if you’re earning enough to owe taxes, only a percentage of your SSDI benefits will be taxed and never the whole amount.

To help you figure out whether you’ll pay taxes on your SSDI benefits, we created this quick guide.

What Kind of Taxes Will You Pay on SSDI?

If your household income is high enough, you may have to pay taxes on your SSDI at the federal and state levels.

Federal Taxes on SSDI

As per IRS guidelines, your SSDI benefits will only be taxable if half of your benefits plus all your other income exceeds their income threshold.

Here’s a quick breakdown of the IRS income threshold based on your tax filing status:

  • $25,000 – single, head of household, or qualifying widow(er), or if you’re married filing separately and lived apart from your spouse for the entire year
  • $32,000 – married filing jointly
  • $0 – married filing separately and lived with your spouse at any time during the tax year

Confused? Let me give you a demonstration.

Let’s say you’re receiving $24,000 in SSDI benefits annually. Then you made another $21,000 from providing consultancy services. So your total income for the year is computed as follows:

SSDI benefits x 50%: $12,000

Other income:             $20,000

Total Income:            $32,000

If you’re single, that’s way more than the SSA’s limit. In this case, you’ll have to pay taxes on your SSDI benefits.

However, as I said, even if you have to pay taxes on your benefits, only a portion of it will be taxable.

Basically, if you’re making less than $44,000, only 50% of your benefits are taxable. But if you’re making more than $44,000, you’ll have to pay taxes on 85% of your SSDI benefits. This applies whether you’re filing taxes as an individual or jointly with your spouse.

State Taxes on SSDI

Aside from federal taxes, most states also impose taxes on social security benefits.

In Florida, however, there are no state income taxes. Meaning, you won’t have to pay state taxes on your SSDI benefits. Though you may have to pay taxes if you move to another state even for just a brief period of time.

A disabled person living in Florida is approved for disability benefits, so they do not have to pay state taxes on SSDI benefits.

What are Considered “Other Sources of Income”?

In addition to your disability benefits, the IRS also considers the following as part of your income:

  • employee compensation
  • fringe benefits
  • partnership income
  • S Corporation income
  • royalties
  • virtual currencies
  • bartering income

If you’re not sure what other income forms part of your tax return, make sure to speak to a qualified accountant first.

Do You Have to File Income Tax for Disability Benefits?

Your disability benefits will be included in your annual income tax return. But if you think that your income for this year will exceed the IRS limit, you can also ask the SSA to withhold taxes from your payments. This way, you’ll only pay a minimal amount come tax time.

VICTOR MALCA – Florida Workers Compensation & Social Security Disability Attorney

Victor Malca P.A. has over 27 years of litigation experience in Workers Compensation and Social Security Disability lawsuits. His experience and continued success when fighting for his clients puts him among the most trusted workers’ compensation attorney’s in Florida. He specializes in representing injured workers on compensation benefit cases and disabled individuals claiming lost social security disability benefits.

Book a free consultation today. Our unwavering advocacy for employee rights and privileges are recognized by our past clients across South Florida.

About The Author

Judy Ponio is a writer and editor for the Victor Malca Law P.A. website and blog. She enjoys helping people in need with questions about social security disability and workers compensation law. She has a passion for helping those in need and the elderly with accurate legal information that can make a positive difference in their lives.