Are Social Security Disability Benefits Taxable?

The question of Social Security Disability Benefits and taxes is an important one. After all, no one wants to be in trouble with the IRS! What’s more, it’s always a good idea to understand how much you’ll take home.

Are your Social Security benefits taxable? The answer is: it depends! To learn everything you need to know about SSDI benefits and taxes, keep reading.

If you still have questions at the end of this post, don’t hesitate to reach out! The Social Security Disability lawyers at Casper & Casper are here to help with SSDI claims.

What Types of Social Security Benefits are Taxable?

Federal Taxes

Most types of Social Security benefits are taxable. This includes the following:

• Social Security Disability benefits
• Retirement benefits
• Spousal benefits
• Survivor benefits

There are several types of benefits that are not taxable. They include:

• Supplemental Security Income (a SSA program designed to help low-income elderly, blind, and disabled people)
• A child’s Social Security dependent or survivor benefits, unless the child has enough income to file a tax return in their own name

State Taxes

Everything above refers to federal taxes. But what about state taxes?

The good news for Ohio residents is that Ohio exempts Social Security benefits from your taxable income. That means, when it comes to your SSDI benefits, you need only worry about federal taxes. (Most states exempt Social Security benefits from taxes, with a few exceptions.)

When Are SSDI Benefits Taxed?

Just because SSDI benefits can be taxed doesn’t necessarily mean yours will be. The portion of your benefits that can be taxed depends on your income level.

For Social Security taxes, the IRS defines “income” as your adjusted gross income (if you have any), plus nontaxable interest income (if you have any), plus half of your Social Security benefits.

If you’re a single individual and your combined income is less than $25,000, you can expect not to pay federal taxes on your SSDI benefits.

If your income is higher, however, you can expect to pay taxes. You’ll pay federal taxes on your benefits if your total combined income is more than:

• $25,000 if you’re single, head of your household, or a qualifying widow(er)
• $25,000 if you’re married and filing separately (living apart from your spouse for the entire year)
• $32,000 if you’re married filing jointly

If you’re married and filing jointly, you’ll need to combine your income with your spouse’s income to determine the taxable portion of your benefits. This is the case even if your spouse didn’t receive any Social Security benefits.

The amount of your benefits subject to taxes depends on income level:

• If your income is $25,000 to $34,000 for an individual, you’ll be taxed on up to 50 percent of your benefits.
• If your income is $32,000 to $44,000 for a married couple filing jointly, you’ll be taxed on up to 85 percent of your benefits. (You’ll never be taxed on the last 15 percent of your benefits, no matter how much your income.)

Here, we should make an important note: when we say that you’ll be taxed on up to 50 or 85 percent of your income, that does not mean that your tax rate is 50 or 85 percent. It means that 50 or 85 percent of your benefits are taxable.

If you do owe taxes, you can anticipate paying the marginal tax rate for your income level.

How Much Will My SSDI Benefits Be Taxed?

As an example, let’s say that you are an individual who receives the average SSDI benefit for 2022 ($1,358 per month) and you have no other sources of income.

Would you pay federal taxes on your SSDI benefits?

Doing some simple math, we see that your combined income would be:

Adjusted gross income ($0) + nontaxable interest income ($0) + half of your SSDI benefits ($8,148) = $8,148.

In this hypothetical scenario, because your combined income is lower than $25,000, your SSDI benefits would not be taxed.

Even if you receive the maximum amount of SSDI benefits, $3,345 per month, your combined income ($20,070) would not exceed the $25,000 threshold.

Of course, your situation might be entirely different. If you also earn some income in addition to your SSDI benefits, or if you are married with a spouse that is a high earner, you’re more likely to owe taxes.

The IRS has an Interactive Tax Assistant to help you determine if your SSDI benefits are taxable.

How Do I Pay My Taxes?

If you know that you’ll need to pay taxes on your SSDI benefits, it’s a good idea to plan for this. (You don’t want a surprise tax bill at the end of the year!)

You have two options: you can ask the Social Security Administration to withhold federal taxes from your SSDI payments, or you can file estimated tax payments. (Estimated tax payments are tax payments you make quarterly.)

To have the SSA withhold taxes, you need to fill out a form (Form W-4V, Voluntary Withholding Request). This is a quick form in which you fill out your personal information and choose the tax rate you want withheld from a few set options. When you’ve filled out the form, mail it to your closest SSA office.

Most people opt to have the SSA withhold taxes because it’s easier. However, you should do what’s right for your personal situation. If you change your mind, you can always ask the SSA to stop withholding taxes so you can make estimated tax payments.

Call Us for SSDI Help

We get it: the Social Security Disability process is complex and confusing. If you have questions or need help filing, we’re here for you.

Contact Casper & Casper today to speak with an experienced Social Security attorney.