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In most cases, SSDI is not taxable. What you need to know about Disability benefits and taxes is that:
- Most people who qualify for these benefits do not make enough money to pay any taxes on them.
- If you make a certain amount of income in addition to your Disability benefits, you may end up owing taxes.
- A Social Security Disability attorney can tell you everything you need to know about whether your benefits are taxable and, if so, how much you owe.
When Is SSDI Not Taxable?
SSDI is not taxable when the recipient makes less than a certain amount of money each year. Since you would not have applied for SSDI if you could support yourself independently, it is not likely that you will make enough to have to pay any taxes on those benefits.
According to the Social Security Administration (SSA), SSDI is designed to help individuals who:
- Worked and paid into Social Security for a certain number of years
- Now have a qualifying disability and are unable to work as much as they did before (or at all)
- Will be unable to work for at least a year and/or are expected to pass away because of their disability
The specifics—for example, how many years you have to work before you can receive benefits—vary depending on your age and other factors.
When Is SSDI Taxable?
Per the SSA, as of 2023, you may have to pay taxes if:
- You file as an individual and make more than $25,000 a year.
- You file with your spouse, and your combined incomes amount to more than $32,000 a year.
- You are married, but you file individually.
The higher your income, the higher your taxes may be. Depending on which tax bracket you fall into, you might have to pay taxes on anywhere from 50 to 85 percent of your Disability benefits.
Federal Versus State Taxes
The above rules pertain to federal taxes only. Each state has its own rules governing when SSDI is taxable and what you need to know about paying taxes on your benefits. Many states do not tax Disability benefits, but a few do.
For more information on how your state’s laws affect your benefits, you can talk to a Social Security Disability lawyer who serves your area. A local law firm will be familiar with your state’s laws and how they impact what you have to pay overall.
Is Supplemental Security Income Taxable?
SSDI is not the only kind of benefit the SSA offers to those in need. Supplemental Security Income (SSI) provides assistance to those who are over retirement age and/or have little to no income, regardless of their disability status (though disabled individuals can also qualify for SSI).
SSI is generally not taxable. Just like SSDI, you would need to make more than $25,000 or $32,000 a year before having to pay taxes on your benefits.
In rare cases, an applicant qualifies to receive both SSDI and SSI. The more income streams you have, the more complicated your situation may be, and the more you could benefit from consulting with a Social Security Disability lawyer.
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Can You Work While on SSDI?
Yes, you have the right to find a job or start your own business while on SSDI. You could even join the Ticket to Work program, which allows beneficiaries to try reentering the workplace without losing their benefits, no matter how much they make while part of the program.
That said, you should always keep the SSA’s income limits in mind. If you earn more than the amount allowed under these programs, you could have to pay taxes on your benefits. In some cases, you could lose your benefits altogether.
A Social Security Disability attorney can examine your situation and tell you:
- How much you can earn before you would have to pay taxes on your benefits
- How much you might owe in taxes, depending on your income and how much you receive in benefits
- If and when getting a job could help or hurt your ability to keep receiving benefits
- How to deal with any disagreements between you and the SSA
What If You Cannot Pay Your Taxes?
You are receiving SSDI for a reason: because money is tight, and you need help making ends meet. Having to pay taxes could take much-needed income out of your pocket when you can least afford it.
If you are struggling to afford your taxes, there are several steps you can take to ease the burden, including:
- Making estimated tax payments every quarter rather than paying a lump sum at tax time (you might still owe something at tax time if you underestimated your income for that year)
- Having the government withhold your taxes, so that the benefits check you get has already been taxed, and whatever you receive is yours to keep
- Hiring an attorney to advise you about your options
Taxes are a difficult subject for anyone, but especially if you are not sure when you have to pay them or if you can afford them. It may help to remember that you do not have to handle everything by yourself. A lawyer can:
- Answer all of your questions about taxes and your benefits
- Help you come up with a plan for paying any taxes you owe—and for paying the firm’s legal fees as well
- Determine if there are any other benefits you qualify to receive
- Make it easier to navigate the complicated world of Disability benefits and taxes
Learn What You Need to Know About SSDI
Farmer & Morris Law, PLLC, can help you file for SSDI, tell you if your SSDI is taxable and everything else you need to know about your benefits. Call for a free case review today so we can tell you more about your rights and responsibilities as a recipient of Disability benefits.
