Social Security Disability Taxable or Not?

May 28, 2018

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A lot of people are wondering whether the benefits of social security disability taxable or not. Before answering your question, you should be aware that there are two types of disability benefits offered by the Social Security Administration for individuals with disabilities and are unable to work because of their disability: Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI). SSI is given to those disabled individuals who have a low income or who can barely support themselves provided that they meet the conditions set by the SSA. They need to prove that their income is not enough to support their basic needs: food and shelter and their disability is on the list of conditions that are eligible for SSI. SSDI is based on an individual’s work history and takes time to be processed and approved.

SSDI vs SSI

SSDI can be taxed the same way all Social Security Benefits are taxed but many recipients of SSDI are not required to pay taxes because of the lack of income to support themselves. About one third of SSDI recipients pay taxes because of their spouse’s or their household’s income. Supplementary Security Income on the other hand is not taxed because the recipient of this benefit are the individuals who need financial assistance as they don’t have enough income or assets to support themselves.

Did you ever wonder if social security disability taxable or not — So is social security disability taxable or not?

How to Determine Taxable SSDI

In order to determine if your social security disability taxable and what percentage is taxable, it’s important to determine your household income. Take half of your SSDI and add it to your household’s other sources of income or finances such as salaries, business profits, investment income, and other resources of income. If the total is less than $25,000 for those disabled individuals who file for SSDI as a single individual, head of household, or as a married individual who has been separated from his/her spouse and has barely lived or hasn’t been living with him/her for more than a year, then it’s unlikely your social security disability taxable. For disabled individuals who are married and have spouses who are getting income, if the total is less than $32,000, then SSDI is non-taxable.

Social Security Disability Taxable

If you are a disabled person filing for taxes as an individual, and your income including half of your SSDI is more than $25,000 but is less than $34,000 per year, then 50% of your SSDI would be taxable. If you are a disabled person who is married and is filing for joint taxes with your spouse and your combined income including half of your SSDI is more than $32,000 but is less than $44,000 per year, then 50% of your SSDI would be taxable. If you are a disabled person filing for individual tax because you are either single, head of the household, or married but living separately from your spouse and your total income including half of your SSDI is more than $34,000 per year, then your SSDI is subject to 85% tax. If you are a disabled person who is married and is filing for joint taxes together with your spouse and your total combined income including half of your SSDI is more than $44,000 per year, then 85% of your SSDI would be taxable. If your source of income is beyond the limits as mentioned above, then your SSDI will be taxed at your marginal rate which means that 10-15% of 50% or 85% of your SSDI or 33-35% of your SSDI for those with a higher income will be subject to tax.

State Tax

Most states do not require tax for disability benefits but there are quite a few states that require tax for disability benefits which may be similar or quite different as that of the federal government.