Do I Have to File Taxes on SSDI Income?
Understand the federal tax implications of Social Security Disability Income. Learn how your total income influences the taxability of your benefits.
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 income tax, a portion of SSDI benefits can become taxable at the federal level under specific income circumstances.
Understanding these conditions is important for recipients to manage their financial obligations. This article clarifies when and how SSDI benefits might be taxed.
Understanding SSDI Taxability Thresholds
The Internal Revenue Service (IRS) determines the taxability of Social Security benefits, including SSDI, based on “provisional income.” Provisional income includes your adjusted gross income (AGI), any tax-exempt interest income, and half of your total Social Security benefits. This calculation determines if your SSDI benefits are subject to federal income tax.
Income thresholds vary by tax filing status. For single filers (including head of household or qualified widow(er)), a portion of benefits may be taxable if provisional income is between $25,000 and $34,000. A larger portion may be taxed if it exceeds $34,000. For married couples filing jointly, the first threshold is $32,000 to $44,000, and the second is above $44,000. If your provisional income is below the initial threshold for your status, your SSDI benefits are not taxable.
Calculating Your Taxable SSDI Amount
Once provisional income exceeds initial thresholds, a specific calculation determines how much of your SSDI benefits are subject to federal income tax. If your provisional income falls within the first threshold range (e.g., $25,000 to $34,000 for single filers), up to 50% of your Social Security benefits may be taxable.
If your provisional income surpasses the second, higher threshold (e.g., over $34,000 for single filers), up to 85% of your Social Security benefits could become taxable. The exact taxable amount is generally the lesser of 85% of your benefits or 85% of the amount by which your provisional income exceeds the second threshold. The actual amount depends on your specific income figures and is calculated using IRS worksheets.
Reporting SSDI on Your Federal Tax Return
Each January, the Social Security Administration (SSA) issues Form SSA-1099, “Social Security Benefit Statement,” to all beneficiaries. This document reports the total benefits received during the previous year in Box 5. This form is essential for accurately completing your federal income tax return.
When filing your federal income tax return on Form 1040, report total Social Security benefits from Form SSA-1099 on Line 6a. The calculated taxable portion of your SSDI benefits, based on provisional income, is reported on Line 6b. Tax preparation software or a qualified professional can assist with these calculations.
To avoid a large tax bill, recipients can elect to have federal income tax withheld from monthly SSDI payments. Complete Form W-4V, “Voluntary Withholding Request,” and submit it to the Social Security Administration. You can choose a withholding rate of 7%, 10%, 12%, or 22%.