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Is SSDI Taxable?

How Social Security Disability Insurance Can Affect Your Tax Liability

Is SSDI Taxable?

A common concern from those who are claiming Social Security disability insurance (SSDI) is how it may affect their tax liability. Do SSDI recipients have to pay taxes on their disability benefits? 

The answer: It depends. 

You may need to pay taxes on SSDI if you are earning income that puts you above a certain threshold. Although, because one of Social Security’s requirements for SSDI is limited income, many claimants do not exceed this threshold. 

An example of when your SSDI benefits may become taxable would be if you earn income from sources other than employment, like dividends, or if your spouse is employed. 

If either, or both, of these examples are applicable to your current financial situation, you should be aware of the thresholds for when SSDI becomes taxable. 

For Veterans: Any VA benefits earned would not count towards total income.

Thresholds and IRS Rules

The IRS rule is: Your SSDI may be taxable if one half of your SSDI, plus all other sources of income, exceeds the income threshold on your tax filing status:

Tax Filing Statues: 

Single, qualifying widow, head of household or married filing separately (if you lived apart from your spouse for entity of tax year): $25,000

Married filing jointly: $32,000

Married and filing separately (if you lived with your spouse at any point during the tax year): $0

If I Exceed the Threshold, How Much of My SSDI is Taxed?

The amount of income tax on SSDI depends on the total of your benefits + other income. In general, the higher the total, the greater the taxable amount. 

Typically, 50% of your SSDI will be taxable, if you exceed your filing threshold. But, up to 85% of your SSDI may be taxable if: 

• As a single filer, your income exceeds $34,000

• As a married couple filing jointly, your income exceeds $44,000

Other Factors May impact Your Tax Liability

For applicants recently approved, any SSDI backpay could bump up your income and put you over a threshold. If this occurs, you would need to pay taxes on your benefits the first year of your approval, but you may not need to in the following years. 

It’s crucial for claimants to understand how Social Security disability can affect their tax liability. If you have specific questions about your situation that were not answered above, we recommend speaking with an accountant.