Do I have to pay tax on my Social Security Disability Benefits?
July 12, 2021
How do I know if my benefits may be taxable?
Social Security Disability Insurance (SSDI) is intended to help those who are unable to work due to a severe medical condition. While SSDI recipients can work (see our article Can I work while receiving Social Security Disability Insurance Benefits?), it is assumed extensive employment is challenging and earnings are capped. In 2021, the earnings cap is $1,310 a month for most beneficiaries. Those earnings, the earnings of a spouse, or other household income can sometimes be sufficient enough that an SSDI recipient’s benefits may be taxable .
To determine whether or not you might owe taxes on your SSDI benefits, you will need to know your “provisional income” (also called combined income). The IRS determines provisional income by adding the sum of your adjusted gross income, your nontaxable interest, and half of your Social Security benefits for the year.
According to the Social Security Administration website, if your provisional income adds up to less than $25,000 for an individual or $32,000 for a married couple filing jointly, you will not pay taxes on your SSDI. If you are over that amount, you will pay tax, based on Internal Revenue Service (IRS) rules.
- If you file a federal tax return as an “individual” and your combined income is
- between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $34,000, up to 85 percent of your benefits may be taxable.
- If you file a joint return, and you and your spouse have a combined income that is
- between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $44,000, up to 85 percent of your benefits may be taxable.
- If you are married and file a separate tax return, you probably will pay taxes on your benefits.
If you have questions about your Social Security Disability benefits, contact us online or call (412) 338-1176. You should discuss any tax implications with your tax advisor, or ask us to connect you with one of our tax attorneys.