Is SSDI Taxable?Here’s a Breakdown by State!

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In general, the Social Security Disability Benefits (SSDI) is taxable, but other disability recipients are not bound to file such an amount if it’s only their sole source of income.

However, recipients of SSDI do end up paying – about a third of the total – due to the joint income reported by married couples.

What is not taxable is Supplemental Security Income (SSI) benefits.

Federal Taxation of Social Security Disability Benefits

is SSDI taxable

To better understand Social Security Disability Benefits taxation, here is a sample guide computation:

You and your spouse file your taxes jointly, let’s say the aggregate amount of joint income exceeds $32,000, which includes $16,000 in SSDI benefits.

This means that a portion of your SSDI benefits is taxable.

However, if you are single and your total income exceeds $25,000 including your SSDI benefits, a portion of your benefit is subject to tax.

A standard income table is followed by taxpayers to determine the portion of your SSDI is taxable and how much the minimum and maximum amount of your SSDI will be taxed.

For a monthly income that exceeds $2,083, the taxable amount in your SSDI is quite complicated.

There are two ways to calculate the taxable amount: the IRS Form 1040 tax return or using Social Security’s tax calculator.

Individuals

Monthly IncomeAnnual IncomeMaximum Taxable Portion of SSDI
0 – $2,0830 – $25,0000%
$2,084 – $2,833$25,000 – $34,00050%
over $2,833over $25,00085%

Married Couples

Monthly IncomeAnnual IncomeMaximum Taxable Portion of SSDI
0 – $2,6660 – $32,0000%
$2,667 – $3,666$32,000 – $44,00050%
over $3,666over $44,00085%

Remember that even though you file a joint income with your spouse, the tax rate to use for your SSDI benefits if, it is taxable, is the tax rate for personal income which is between 15% to 25% of your tax benefits.

If you generate a higher income for the given period, the taxable percentage of your benefits will be up to 85%, and your tax payable will be 28% of the taxable SSDI.

If you have other income, the tax rate will be the same.

Taxation of Social Security Disability Back Pay

Is SSDI Taxable

It is to be noted that large lump-sum back payments correspond to a higher amount of tax payable.

Lump-sum backpay happens when you receive the aggregate amount of benefits from the moment you applied for the disability benefits until it was approved.

To prevent this huge tax payment from the lump sump, IRS allows the declaration of benefits to apply from the previous year to previous tax returns.

For example, 22 months of SSDI benefits are granted to you as your back pay.

And instead of declaring the 22 months of benefit in the current year which will cost you greater tax liability, the IRS allows you to amend your previous year’s tax income declaration.

You put some portion of your SSDI benefits on your previous income tax to prevent a bigger tax payable for the current period.

It is better to seek the advice of experts in the field such as a CPA or a Lawyer if you are in a more complicated situation.

State Taxation of Social Security Disability Benefits

Listed below are the states that tax SSDI under certain conditions:

  • Connecticut
  • Colorado
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont, and
  • West Virginia

Some states follow the federal government tax table while others have their own.

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  1. University of Pittsburgh "Social Security Disability Insurance (SSDI)" Page 1 . November 2, 2022