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Are Social Security Disability Benefits Taxed?

Gordon, Wolf & Carney Oct. 5, 2023

According to the Social Security Administration (SSA), 70 million people in the U.S. received some form of Social Security benefit in 2021. You may want to know more about Social Security Disability benefits, or you may already be receiving them. Either way, you might be curious about how these benefits are taxed—and if they are even taxed at all. If you need guidance and advice on the tax implications of Social Security Disability benefits, contact us at Gordon, Wolf & Carney in Maryland, serving clients nationwide. With over 100 years of combined experience, our team is ready to support you through any problems relating to your Social Security Disability. 

Are Social Security Disability Benefits Taxed? 

The short answer is yes, sometimes—but in order to be liable for tax, you must also have other income in addition to your benefits that would take you over the maximum threshold for your tax filing status.  

First, let’s review some basic facts about Social Security Disability Insurance. 

You are eligible to receive Social Security Disability Insurance (SSDI) if you 

  • Pass the “work test” (that is, prove that you have worked for long enough and earned enough to qualify for Social Security benefits)  

  • Prove that you have become disabled and that, as a result, you are no longer able to work. (The Social Security Administration is strict about their definition of “disabled”—for example, your condition must be “severe” enough that you cannot work for 12 months or longer. Make sure to check with them or with your attorney to determine your eligibility.)

SSDI benefits are paid monthly, usually until you can return to work. If you reach retirement age before that happens, your SSDI benefits will then be paid out as retirement benefits. 

SSDI benefits are funded by payroll taxes and are used to help those who can no longer work due to disability, so you may think these payments are not taxable. However, you may be required to pay taxes on your SSDI benefits if you receive any other income. These can include investment accounts, any income that your spouse earns, and tax-exempt interest.  

Are Supplemental Security Income (SSI) Payments Taxable?

Supplemental Security Income (SSI) payments—which you may be entitled to if you are disabled or elderly—do not require work tests in order to receive them, and are not taxable. It’s important, though, to reach out to a Social Security attorney if you have any questions about your specific situation.  

What Is the Taxable Amount of SSDI Benefits?

The taxable amount of your SSDI benefits varies depending on your tax filing status. You are required to pay taxes on your SSDI benefits if you exceed the income threshold based on your filing status; this happens when the sum of half of your benefits and all of your other income exceeds this threshold.  

If you are single, head of household, a qualifying widower, or married filing separately, your threshold is $25,000; if you are married filing jointly, your threshold raises to $32,000. If you are married and filing separately but you lived with your spouse at any time during the tax year, your threshold is $0. 

If you file as an individual and your combined income is between $25,000 and $34,000, you will only have to pay tax on up to 50% of your benefits. If you file as an individual and your combined income is over $34,000, you may have to pay taxes on up to 85% on your benefits. 

If you file jointly, you may pay tax on up to 50% of your benefits if the combined income of both you and your spouse is between $32,000 and $44,000; if your combined income is more than $44,000, you may pay tax on up to 85% of your benefits. 

How Is It Paid?

You can pay in one of two ways: you can pay estimated quarterly amounts to the IRS, or you can request to withhold those taxes from your benefits. You can make this request to the SSI by mail. More information can be found on the SSI website, as well as helpful phone numbers.  

To make estimated quarterly payments, use Form 1040-ES and send it with the estimated payment either by mail or online to the IRS. Make sure you have a tax accountant or attorney review this document for you, or help you if you aren’t sure how to estimate the total tax.  

Serving Maryland Residents With Passionate Care

No one should have to navigate these kinds of issues alone. If you need help figuring out your Social Security Disability Benefit tax liability, reach out to us at Gordon, Wolf & Carney in Towson, Maryland. Serving clients nationwide, our Social Security Disability attorneys—headed by Richard S. Gordon, Martin E. Wolf, and Benjamin C. Carney—are ready to meet your needs.