Are SSDI Benefits Taxable? It Depends on Your Income
Are your SSDI benefits taxable? Understand how your income determines the taxable portion of your disability benefits and how to report them.
Social Security Disability Insurance (SSDI) benefits provide income to individuals unable to work due to a significant disability. A portion of these federal benefits may be subject to federal income tax, depending on a recipient’s other income sources.
Determining Taxability with Provisional Income
The determination of whether your SSDI benefits are taxable hinges on a calculation known as “provisional income.” This figure is calculated by adding your Adjusted Gross Income (AGI), any nontaxable interest you earned, and one-half of your total Social Security benefits, including SSDI payments.
Once your provisional income is calculated, it is compared against specific thresholds set by the Internal Revenue Service (IRS).
For individuals filing as single, head of household, or qualifying widow(er):
If your provisional income is below $25,000, none of your SSDI benefits are taxable.
If your provisional income falls between $25,000 and $34,000, up to 50% of your benefits may be subject to federal income tax.
If your provisional income exceeds $34,000, up to 85% of your SSDI benefits could be taxable.
For married couples filing jointly:
If your combined provisional income is below $32,000, your SSDI benefits are not taxable.
If this income is between $32,000 and $44,000, up to 50% of your benefits may be taxable.
If your provisional income exceeds $44,000, up to 85% of your SSDI benefits may be subject to federal income tax.
Calculating Your Taxable Benefits
Once your provisional income indicates that a portion of your SSDI benefits may be taxable, specific calculations determine the exact amount. If your provisional income is between the first and second thresholds for your filing status, the taxable amount of your benefits is the lesser of two figures. This is either 50% of your total SSDI benefits or 50% of the amount by which your provisional income exceeds the first threshold.
If your provisional income surpasses the second threshold, a different calculation applies to determine the taxable portion. In this scenario, the amount of taxable benefits is the lesser of 85% of your total SSDI benefits or 85% of the amount by which your provisional income exceeds the second threshold, combined with the amount calculated under the 50% rule for the income between the first and second thresholds.
Reporting SSDI Benefits on Your Tax Return
Recipients of SSDI benefits will receive Form SSA-1099, the Social Security Benefit Statement, from the Social Security Administration (SSA) each January. This form details the total benefits received in the prior year. Specifically, Box 5 on Form SSA-1099 shows your net benefits for the year, which is the figure you will use when preparing your tax return.
This net benefit amount from Box 5 of Form SSA-1099 is reported on line 6a of Form 1040 or Form 1040-SR. The calculated taxable portion of your SSDI benefits is then reported on line 6b of the same form.
Voluntary Tax Withholding
To proactively manage potential tax liabilities, recipients of SSDI benefits have the option to have federal income tax withheld directly from their monthly payments. This can help avoid owing a substantial amount at tax time or having to make estimated tax payments throughout the year. The process for requesting this withholding involves completing IRS Form W-4V, Voluntary Withholding Request.
On Form W-4V, recipients can select a specific percentage of their benefits to be withheld for federal income tax purposes. The available withholding rates are 7%, 10%, 12%, or 22%. Once completed, Form W-4V should be submitted to your local Social Security Administration office, not the IRS.