Do I Have to Claim SSDI on My Taxes?

Social Security Disability Insurance (SSDI) provides financial assistance to individuals unable to work due to a medical condition. While many government benefits are not subject to federal income tax, SSDI benefits can become taxable depending on a recipient’s overall income. Understanding when these benefits are taxed and how to report them accurately is important for individuals receiving SSDI.

Determining Taxability of Benefits

The taxability of Social Security Disability Insurance (SSDI) benefits depends on your “provisional income,” which the IRS also calls “combined income.” This is calculated by adding your adjusted gross income (AGI), any nontaxable interest, and half of your total Social Security benefits. Provisional income is then compared against thresholds to determine if your benefits are taxable.

For individuals filing as single, head of household, or qualifying surviving spouse, your SSDI benefits are not taxable if your provisional income is less than $25,000. If your provisional income falls between $25,000 and $34,000, up to 50% of your Social Security benefits may be subject to tax. Should your provisional income exceed $34,000, up to 85% of your benefits could become taxable.

Married individuals who file jointly have different thresholds. Their benefits are not taxed if their combined provisional income is less than $32,000. If their provisional income is between $32,000 and $44,000, up to 50% of the Social Security benefits may be taxed. For joint filers whose provisional income is greater than $44,000, up to 85% of their benefits can be subject to tax.

A distinct rule applies to married individuals who file separately and lived with their spouse. If they lived together, their provisional income threshold for taxability is $0, meaning a portion of their benefits will likely be taxable. The maximum amount of benefits subject to taxation is always 85%, regardless of income level.

For example, a single individual receiving $15,000 in SSDI benefits and $10,000 in other adjusted gross income would have a provisional income of $17,500 ($10,000 AGI + $7,500 half of SSDI). Since this is below the $25,000 threshold, none of their SSDI benefits would be taxable. If that same individual had $20,000 in other adjusted gross income, their provisional income would be $27,500, placing them in the 50% taxability bracket.

Reporting Taxable Benefits on Your Return

The taxable portion of your Social Security Disability Insurance benefits must be accurately reported on your federal income tax return. Each year, the Social Security Administration (SSA) issues Form SSA-1099, “Social Security Benefit Statement.” This form summarizes the benefits you received during the previous calendar year and is crucial for tax reporting.

Form SSA-1099 contains several boxes with important information. Box 5 presents the net benefits received, calculated as gross benefits minus repayments, which is the amount generally used to figure taxability.

You will report your Social Security benefits on Form 1040 or Form 1040-SR. The total amount of benefits received, as shown in Box 5 of Form SSA-1099, should be entered on the appropriate line. The calculated taxable portion is then entered on another line.

Tax preparation software and online filing platforms typically guide you through this process. They will prompt you to enter the information from your Form SSA-1099 and assist in calculating the taxable amount based on your provisional income and filing status. This streamlines the reporting process.

Handling Unique Circumstances

Specific situations can affect how SSDI benefits are taxed or reported. One circumstance involves the repayment of Social Security benefits received in a prior year. If you repaid benefits, the amount is reflected in Box 4 of your SSA-1099, reducing your net benefits in Box 5 for the current year.

If the total amount repaid exceeds the gross benefits received in the current year, Box 5 of your SSA-1099 may show a negative figure, indicating no taxable benefits for that year. If the repayment was for benefits included in your taxable income in a prior year and exceeds $3,000, you may claim an itemized deduction or calculate a tax credit.

Another situation arises when benefits are paid to a dependent, such as a child. Social Security benefits paid to a dependent are considered the dependent’s income for tax purposes, not the parent’s, even if the parent receives the payments. The taxability of these benefits is determined based on the dependent’s provisional income and their own filing status thresholds.

Recipients of SSDI benefits can have federal income tax withheld from their monthly payments. This can help avoid owing a large sum at tax time or meet estimated tax payment requirements. You can elect to have 7%, 10%, 12%, or 22% of your monthly benefit withheld by contacting the Social Security Administration or using their online services.