Do You Have to File Taxes on SSDI?

Social Security Disability Insurance (SSDI) provides financial assistance to individuals unable to work due to a severe medical condition. Administered by the Social Security Administration, these benefits serve as an income source for many Americans with disabilities. A common question among recipients is whether they are subject to federal income tax.

Understanding the tax implications of SSDI benefits is important for financial planning. While some individuals may find their benefits are not taxed, others could owe federal income tax on a portion of what they receive. Taxability depends on an individual’s overall income situation, not solely on SSDI receipt.

Determining if Your SSDI is Taxable

Not all Social Security Disability Insurance benefits are subject to federal income tax. The Internal Revenue Service (IRS) uses “combined income” to determine if any portion of your SSDI benefits will be taxed. This threshold helps assess tax liability for Social Security benefits.

Combined income is your adjusted gross income (AGI) from all other sources, plus any tax-exempt interest income, and one-half of the Social Security benefits received for the year. For instance, interest from municipal bonds is included in this calculation.

The IRS sets income thresholds that trigger the taxability of SSDI benefits, depending on your tax filing status. For single filers, head of household, or qualifying widow(er), if your combined income is between $25,000 and $34,000, a portion of your benefits may be taxable. If your combined income exceeds $34,000, a larger portion may be taxable.

For married couples filing jointly, the thresholds are higher. If your combined income is between $32,000 and $44,000, some of your benefits may be taxable. If your combined income exceeds $44,000, a greater percentage of your benefits may be taxable. If you are married filing separately and lived with your spouse at any point during the tax year, your benefits may be taxable regardless of the amount of your combined income, with a $0 threshold for taxability. If your combined income falls below the initial threshold for your filing status, your SSDI benefits are not taxable.

Calculating the Taxable Portion of Your SSDI

Once combined income exceeds the initial thresholds, calculate the specific amount of your SSDI benefits subject to federal income tax. Benefits are taxed in two tiers, with different percentages depending on how much combined income surpasses established limits.

For individuals whose combined income falls within the first tier (between $25,000 and $34,000 for single filers or $32,000 and $44,000 for married couples filing jointly), up to 50% of your Social Security benefits may be taxable. The taxable amount in this tier is the lesser of two figures: either 50% of your total Social Security benefits, or 50% of the amount by which your combined income exceeds the lower threshold ($25,000 for single filers, $32,000 for joint filers).

For individuals with higher combined incomes (exceeding $34,000 for single filers or $44,000 for married couples filing jointly), up to 85% of your Social Security benefits may be taxable. In this second tier, the taxable amount is the lesser of 85% of your total Social Security benefits, or the sum of specific amounts. This sum includes 50% of the difference between the first and second thresholds (e.g., $9,000 for single filers) plus 85% of the amount by which your combined income exceeds the second, higher threshold. Married individuals filing separately who lived with their spouse at any time during the year may find up to 85% of their benefits are taxable if their combined income is above $0.

Reporting Your SSDI on Your Tax Return

After determining if your SSDI benefits are taxable and calculating the specific taxable amount, the information must be reported on your federal income tax return. The primary document for this purpose is Form SSA-1099, “Social Security Benefit Statement,” mailed by the Social Security Administration (SSA) each January. This form summarizes the total Social Security benefits you received during the previous year.

Form SSA-1099 details the net benefits paid, found in Box 5, and any federal tax withholding in Box 6. This form is needed for correctly completing your tax return. If you do not receive your SSA-1099 or misplace it, a replacement can be obtained through your “my Social Security” online account or by contacting the SSA directly.

On Form 1040, you will report your SSDI benefits on specific lines. The total amount of Social Security benefits received, as shown in Box 5 of your SSA-1099, should be entered on Line 6a. The calculated taxable portion of your Social Security benefits is then entered on Line 6b. The IRS provides Publication 915, “Social Security and Equivalent Railroad Retirement Benefits,” which offers guidance and worksheets for these calculations and reporting procedures.