People with disabilities are provided with assistance through Social Security Disability Insurance (SSDI). U.S. federal funds and administration of these benefits are provided by the SSA (Social Security Administration).
In 2020, the SSDI program provided benefits to 9.7 million Americans.
Many people wonder whether social security disability benefits are taxable, even though these benefits help millions of people in need.
If you’re covered by SSDI, you and your family will receive benefits.
A person must have worked long enough and paid Social Security taxes on their earnings to qualify for coverage.
More specifically, you must be suffering from a medical condition that renders you incapable of working for at least 12 months or is expected to cause your death.
The Social Security Administration collects medical and other information from you when you apply for SSDI so that it can determine if you are disabled.
Your condition must also be updated by the administration.
Who Can Receive SSDI Benefits?
Applicants must meet the following requirements:
- Inability to work due to medical conditions that should last for at least a year or end in death.
- Must not be partially or short-term disabled.
- Must meet the standard of the Social Security Administration’s definition of disability
- You must not be over retirement age.
Check out the SSA’s Benefit Eligibility Screening Tool to see if you are eligible for benefit programs.
Does Social Security Disability Come with Taxes?
This generally depends on the amount of your income.
SSDI benefits are not tax-deductible, so as all other sources of income, including tax-exempt interest, will be added to half of your disability benefits to determine your total income.
That total income should be below the IRS threshold.
Those filing as singles are limited to a filing amount of $25,000, and those filing jointly as a married couple are limited to a filing amount worth $32,000.
Nonetheless, if you earn more than these limits, there are two rates to consider.
- In the case of a single filer whose income ranges between $25,000 and $34,000, you may be required to include up to 50% of your benefits as taxable income.
- Your tax return includes up to 85 percent of your income if you make more than $34,000.
Married couples filing jointly would pay the following taxes:
- In the range of $32,000 to $44,000, you can receive up to 50 percent of SSDI benefits.
- The disability benefits you receive can be up to 85 percent of your combined income if it exceeds $44,000.
Different Disability Benefits taxes in the Few States
Social security and disability benefits are not taxed in the majority of states, but 13 did to some extent as of 2020. They are:
- New Mexico
- North Dakota
- Rhode Island
- West Virginia
Meanwhile, taxing benefits may differ from state to state.
A few states have reduced or eliminated taxes on benefits, while others offer deductions or exemptions based on age or income.
Because Social Security recipients have little or no additional income, most do not have to pay taxes on their benefits.