Do You Have To File Taxes On Social Security Disability?

A common concern for people receiving Social Security disability benefits through the Supplemental Security Income and Social Security Disability Insurance programs is taxes. More specifically, people want to know whether they need to file taxes on SSD benefits. The answer is that it depends.

Whether you must file a return and pay taxes depends on a number of factors, not the least of which is the amount of income you have from sources and your SSD benefits. Another factor is where you live. Some states do not tax Social Security benefits, so you may not owe taxes on your disability income if you are fortunate enough to live in one of those states.

In order to give you a complete answer to the question posed in the title, this article looks at the rules that determine whether you need to file an income tax return on your disability benefits. As you read through it, keep in mind that a disability advocate at The Keener Law Firm is an outstanding resource to rely upon when you have questions about all matters related to disability benefits.

Reporting Disability Benefits

Most of the income you receive as wages, interest, dividends, and other forms of income is automatically reported to the Internal Revenue Service and the state where you live by the person or entity paying it to you. Your disability benefits are no exception, so the Social Security Administration reports the yearly total of payments that you received on an SSA-1099 form. A copy of the SSA-1099 is usually sent to you in January, so you’ll have it to file your federal and state income tax returns for the prior year.

Getting an SSA-1099 does not necessarily mean you must file taxes on SSD with the state or federal government. The IRS has rules that determine whether you must file a return and pay taxes. States have their own rules based, so ask a disability advocate about the filing rules under the laws of the state where you live during the tax year in question.

Federal Rules About When To File Taxes On SSD Benefits

Before getting into the IRS rules about reporting SSD benefits and other income, you do not have to include benefits you receive through SSI as income because they are not taxable. If you receive disability payments through SSDI, whether or not your benefits are taxable primarily depends on how much income you received during the year from sources other than SSD.

The IRS regulations require that you add income from other sources to one-half of your SSD benefits received during the year. This is your combined income.

Other Income Sources Include the Following:

• Employment and self-employment income.
• Interest income, including tax-exempt interest.

Add your income from other sources to one-half of your SSD benefits and use the result along with your filing status to determine whether and how much of your SSD is taxable.

Use the following to determine how much of your disability benefits are subject to federal taxes:

• If you file as an individual with a combined income of $25,000 to $34,000, 50% of your SSDI may be taxable. However, if your income exceeds $34,000, 85% of the benefits you receive from Social Security may be taxable.
• Filers using a joint tax return with a spouse will have 50% of their disability payment taxed if the return shows income of $32,000 to $44,000. If the return shows income exceeding $44,000, then 85% of benefits may be taxable.
• If you are married, lived with your spouse for at least a portion of the year, and file separately from your spouse, 85% of your Social Security benefits may be taxable.

As far as state income taxes are concerned, each state has its own tax laws and filing requirements, so ask a disability advocate or tax preparer about the law and filing rules in your state.

Do You Have To File A Tax Return If Your Only Income Is Social Security Disability?

If you earn less than $25,000 and file individually or less than $32,000 and file jointly with your spouse, your benefits may not be subject to payment of federal income taxes, but you may owe taxes on other income. Even if your benefits are not taxable and you have no other source of income, it’s probably a good idea to file a federal income tax return. Filing the return does not mean that you must pay taxes on nontaxable benefits, but it will ensure that you receive any stimulus payments that may be authorized in the future.

Contact A Disability Advocate

When you need assistance with an initial application or to appeal a denial of a claim or a termination or reduction in benefits, a disability advocate at The Keener Law Firm can help. Contact us today for a free consultation and claim review.