Do I Have to Pay Taxes on Social Security Disability Benefits?
To qualify for Social Security Disability Insurance (SSDI), you must have worked in the past but no longer can because of your health. If you can’t work, you likely don’t earn enough income to pay taxes on your benefits.
This can change, however, if you have other sources of income.
These include your spouse’s income and any dividends or interest you earn on investments. When you combine these sources with your Social Security Disability benefits, you may exceed the IRS’s limits on what you can earn and remain tax-free.
The IRS will tally these income sources and half of your disability benefits to determine your “combined income.”
Don’t worry—this doesn’t mean you’ll lose half your benefits. It just means the IRS only counts half of them toward your taxable income.
Once the IRS determines your combined income, it compares them against its tax thresholds. As of 2024, these were the brackets:
- For unmarried individuals earning:
– $25,000-$34,000 – 50 percent of your benefits are taxable.
– Above $34,000 – 85 percent of your benefits are taxable. - For married couples filing jointly and earning:
– $32,000-$44,000 – 50 percent of your benefits are taxable.
– Above $44,000 – 85 percent of your benefits are taxable. - For married couples filing separately and living apart for the entire tax year:
– $25,000-$34,000 – 50 percent of your benefits are taxable.
– Above $34,000 – 85 percent are taxable. - For married couples filing separately and living together at any time in the tax year:
– 85 percent of your benefits are taxable.
As you can see, it’s complicated.
Your tax professional can help you sort through your circumstances and find the best strategy to ease any tax burden. For example, you can pay estimated taxes every quarter. Or you can spread your income over several years in some cases.
All this doesn’t take away from the relief Social Security Disability benefits can still provide. Don’t let the possibility of taxes discourage you from seeking help.
You know . . . you paid taxes when you worked so you’d be covered by these benefits in the first place.
Our disability advocates at Hanley Disability are here to help you at any stage of the application process. In Indianapolis, Danville, Franklin, Lebanon, Noblesville and all across Central Indiana, get in touch with us.
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