How Much of My SSDI Is Taxable?

Social Security Disability Insurance (SSDI) provides financial support for individuals unable to work due to a significant disability. While many government benefits are tax-exempt, a portion of SSDI benefits can be subject to federal income tax. The taxability of these benefits depends on the recipient’s total income from all sources, and understanding how your income interacts with specific IRS rules is necessary to determine if your SSDI benefits will be taxed.

Calculating Provisional Income

The Internal Revenue Service (IRS) employs a specific calculation known as “provisional income” to ascertain whether and how much of a person’s Social Security benefits, including SSDI, are taxable. This calculation is a foundational step in determining your potential tax liability. Provisional income is determined by adding your adjusted gross income (AGI), any tax-exempt interest, and one-half of your annual Social Security benefits.

Your AGI encompasses most taxable income sources, such as wages, self-employment income, interest, dividends, pensions, and capital gains. Even federally tax-free municipal bond interest must be included. For instance, if you have an AGI of $20,000, $2,000 in tax-exempt interest, and receive $24,000 in annual SSDI benefits, your provisional income would be calculated by adding $20,000 (AGI) + $2,000 (tax-exempt interest) + $12,000 (half of SSDI benefits), resulting in a provisional income of $34,000. This figure then serves as the basis for applying income thresholds.

Applying Income Thresholds

Once provisional income is determined, it is compared against specific income thresholds set by the IRS to ascertain the taxable portion of your SSDI benefits. These thresholds vary based on your tax filing status. These thresholds have not been adjusted for inflation since the mid-1990s, which means more beneficiaries may find a portion of their benefits taxable over time.

For single filers, including those filing as head of household or qualifying widow(er), if your provisional income is less than $25,000, none of your Social Security benefits are taxable. If it falls between $25,000 and $34,000, up to 50% may be taxable. Should it exceed $34,000, up to 85% may be taxable.

For those married filing jointly, the thresholds are different. If provisional income is less than $32,000, Social Security benefits are not taxable. If provisional income is between $32,000 and $44,000, up to 50% of Social Security benefits may be taxable. If provisional income is above $44,000, up to 85% of Social Security benefits may be taxable.

Reporting Taxable Benefits

Once the taxable amount of your SSDI benefits has been calculated, reporting this on your federal income tax return is the next step. Each January, the Social Security Administration (SSA) sends Form SSA-1099, “Social Security Benefit Statement,” to all beneficiaries. This form provides the total amount of benefits received in the previous year in Box 5, and any federal income tax withheld.

You will use the information from Form SSA-1099 to report your Social Security benefits on your federal income tax return, typically Form 1040. The total benefits received, as shown in Box 5 of your SSA-1099, is reported on Line 6a of Form 1040. The calculated taxable portion is reported on Line 6b. Tax preparation software or a qualified tax professional can assist in determining and reporting the taxable portion of your benefits.