Do I Have to Pay Taxes on My SSDI Benefits?

Social Security Disability Insurance, or SSDI, provides a financial support system for individuals who are unable to work due to a significant disability. A common question for recipients is whether these benefits are subject to federal income tax. The answer depends on the total amount of other income you and your family receive, and while many recipients will not owe taxes, a portion find that some of their benefits are taxable.

Determining if Your SSDI is Taxable

The taxability of your SSDI benefits hinges on a figure the IRS calls “combined income.” This is not a number found on a single document but is a figure you must calculate. The formula is your Adjusted Gross Income (AGI) plus any nontaxable interest plus one-half of your total Social Security benefits for the year.

To begin, you will need Form SSA-1099, the Social Security Benefit Statement, which the SSA mails each January. This form details the total benefits you received, with the figure for your calculation in Box 5. Your AGI includes all other taxable income, such as wages, self-employment earnings, or pensions. Nontaxable interest, a less common income source, often comes from municipal bonds.

Once you calculate your combined income, you compare it to IRS thresholds based on your tax filing status.

• For an individual filing as single or head of household, if your combined income is between $25,000 and $34,000, you may have to pay tax on up to 50% of your benefits. If your combined income is more than $34,000, up to 85% of your benefits may be taxable.
• For those who are married and filing a joint return, the 50% range is for a combined income between $32,000 and $44,000, and the 85% range applies to income over $44,000.

If your income falls below these base amounts, your SSDI benefits are not taxed at the federal level.

For example, a single individual with $12,000 in SSDI benefits and $20,000 in other income would have a combined income of $26,000. This is calculated by taking half of the SSDI ($6,000) and adding it to the other income ($20,000). Since $26,000 falls into the $25,000-$34,000 range, up to 50% of their benefits could be taxed. A married couple filing jointly with $20,000 in SSDI and $30,000 in other income has a combined income of $40,000 ($10,000 from SSDI + $30,000 other income), placing them in the 50% taxable bracket for joint filers.

Handling Lump-Sum SSDI Payments

A lengthy SSDI approval process can result in a large, one-time payment for past-due benefits covering multiple years. Receiving this payment in a single tax year can inflate your income and potentially push you into a higher tax bracket, as the entire amount is reported on the Form SSA-1099 for the year it was paid.

The IRS provides an option known as the “lump-sum election” to address this. This method allows you to treat the benefits as if you received them in the years they were due, rather than all at once. This calculation is performed on your current year’s tax return and does not require you to file amended returns for prior years.

By attributing portions of the payment to previous years, you can lower your combined income for the current year and reduce the taxable percentage of your benefits. The rules and worksheets for this calculation are in IRS Publication 915, “Social Security and Equivalent Railroad Retirement Benefits.” Using this method can be complex, as it involves looking at your income from prior years to take advantage of lower income thresholds, thereby minimizing the overall tax paid.

State Taxation of SSDI Benefits

While federal tax rules are uniform, the taxation of SSDI benefits at the state level varies. The majority of states do not impose an income tax on Social Security benefits, and the number of states that do has been shrinking. As of 2025, the states that may tax Social Security benefits include:

• Colorado
• Connecticut
• Minnesota
• Montana
• New Mexico
• Rhode Island
• Utah
• Vermont
• West Virginia

The rules in these states are not tied to federal regulations. Each state has its own income thresholds, deductions, and exemptions that determine if your SSDI is taxable. For instance, some states offer full exemptions for taxpayers below a certain income level, while others provide partial deductions or credits.

Because these state-specific rules can change, recipients living in one of these states should get the most current information. The best sources are the official website for your state’s department of revenue or a qualified local tax professional, who can provide guidance based on current laws.

Reporting and Paying Taxes on SSDI

Once you determine that a portion of your SSDI benefits is taxable, you must report this on your federal income tax return, Form 1040. You will enter the total net benefits from Box 5 of your SSA-1099 on line 6a. The taxable portion, which you calculated based on your combined income, is reported on line 6b.

There are two methods for paying the income tax owed on your benefits throughout the year to avoid a large bill or underpayment penalties. The first is voluntary withholding. You can ask the SSA to withhold federal tax from your monthly payments by completing and submitting Form W-4V, Voluntary Withholding Request. This form, which allows you to choose a withholding rate of 7%, 10%, 12%, or 22%, must be sent directly to the SSA, not the IRS.

The second method is to make estimated tax payments. If you anticipate owing tax on your SSDI and are not having enough withheld, you may be required to pay taxes quarterly using Form 1040-ES, Estimated Tax for Individuals. This involves calculating your expected tax liability for the year and paying it in four installments, due in April, June, September, and January.