Do You Pay Tax on SSDI? When and How It’s Taxed

Social Security Disability Insurance (SSDI) is a federal insurance program designed to provide financial assistance to individuals who are unable to work due to a significant disability. While these benefits offer a financial safety net, a portion of your SSDI benefits may be subject to federal income tax, depending on your overall income.

When and How SSDI Benefits Are Taxed

Whether your SSDI benefits are taxed at the federal level depends on your “combined income.” This calculation includes your Adjusted Gross Income (AGI), any tax-exempt interest income you may have, and one-half of your total Social Security benefits, which encompass SSDI. Your AGI represents your gross income after certain deductions are applied.

The IRS sets specific thresholds for benefit taxability. For individuals filing as single, head of household, or qualifying surviving spouse, if your combined income is between $25,000 and $34,000, up to 50% of your SSDI benefits may be taxable. If your combined income exceeds $34,000, up to 85% of your benefits could be subject to federal income tax.

For married couples filing jointly, different thresholds apply. If your combined income falls between $32,000 and $44,000, up to 50% of your SSDI benefits may be taxable. If your combined income exceeds $44,000, up to 85% of your benefits may be subject to federal income tax.

If you are married and file separately, and you lived with your spouse at any point during the tax year, a $0 threshold applies, meaning a portion of your benefits will likely be taxable regardless of income level. While federal rules are consistent across the United States, state tax laws regarding Social Security benefits can vary.

Reporting Your SSDI Benefits for Tax Purposes

Each January, the Social Security Administration (SSA) sends out Form SSA-1099, “Social Security Benefit Statement,” to all recipients. This document details the total Social Security benefits you received in the previous calendar year, including any repayments.

When filing your federal tax return, report your SSDI benefits on Form 1040. The gross amount of your Social Security benefits is reported on Line 6a of Form 1040. The calculated taxable portion of your benefits, determined by your combined income as outlined in the previous section, is then reported on Line 6b.

You can have federal income tax voluntarily withheld from your monthly SSDI payments to avoid a large tax bill. This can be done by completing Form W-4V, “Voluntary Withholding Request,” which is available from the IRS. You can select a withholding rate of 7%, 10%, 12%, or 22% of each payment. Submit Form W-4V directly to your local Social Security Administration office, not to the IRS. This voluntary withholding remains in effect until you choose to change or stop it, or until your payments cease.