Long-term disability payments count as income, which can reduce or stop your SSDI benefits

If you receive long-term disability (LTD) payments from an employer or insurance policy, Social Security will count most of that money as income. This means your SSDI benefit amount may decrease, or in some cases, your benefits may stop entirely. The exact impact depends on how much you receive and which type of SSDI you are on.

The key rule is called the Substantial Gainful Activity (SGA) limit. In 2024, if your total monthly income—including LTD payments—exceeds $1,550, Social Security may determine you are no longer disabled and stop your benefits. This threshold changes each year, so the amount that triggers a reduction or termination will be different in future years.

However, not all of your LTD payment counts. Social Security deducts certain costs before calculating your income, such as taxes withheld from the payment and any premiums you paid out of your own pocket for the insurance policy. Understanding what counts and what does not can make a real difference in how much you keep.

Key Takeaways

  • Long-term disability payments are counted as income by Social Security, and exceeding the SGA limit of $1,550 per month (in 2024) can reduce or eliminate your SSDI benefits.
  • Social Security deducts taxes and any premiums you paid yourself from your LTD payment before calculating your countable income.
  • If your LTD and SSDI combined exceed the SGA limit, you must report the LTD income to Social Security within 10 days of receiving it.
  • Some LTD payments may be offset by SSDI under a "benefit offset" clause in your insurance policy, meaning your total payment shrinks as SSDI increases.
  • You should contact your local Social Security office or call 1-800-772-1213 before accepting an LTD settlement to understand the full impact on your benefits.

How Social Security counts your long-term disability payment

When you receive an LTD check, Social Security treats it as unearned income. This is different from wages you earn by working. The agency counts the gross amount you receive, then subtracts certain deductions to arrive at your countable income.

The deductions Social Security allows are: federal income tax withheld, state income tax withheld (if applicable), and any premiums you paid out of your own pocket for the disability insurance. If your employer paid the entire premium and you paid nothing, then no premium deduction applies. If you and your employer split the cost, you can only deduct your portion.

For example, if you receive $2,000 per month in LTD, $300 is withheld for taxes, and you paid $100 per month in premiums yourself, your countable income would be $2,000 − $300 − $100 = $1,600. Since this exceeds the $1,550 SGA limit, Social Security would reduce your SSDI benefit or potentially terminate it.

The difference between SSDI reduction and benefit offset

There are two separate ways your SSDI can be affected by LTD income. Understanding which one applies to you matters because the math works differently.

Reduction due to excess income happens when your total countable income exceeds the SGA limit. Social Security will reduce your SSDI benefit dollar-for-dollar once you cross that threshold. If you are over the limit by $100, your SSDI drops by $100. If you are over by $500, your SSDI drops by $500 or stops entirely if your benefit is smaller than the overage.

Benefit offset is a clause written into some employer-sponsored or private LTD insurance policies. It says that as your SSDI benefit increases, your LTD payment decreases by the same amount. This is not a Social Security rule—it is a contract between you and the insurance company. For example, if your LTD policy pays $3,000 per month and you receive $1,200 in SSDI, the policy might reduce your LTD to $1,800 so your total stays at $3,000. You should review your LTD policy documents to see if an offset clause exists.

What happens if you do not report your long-term disability income

Social Security requires you to report any income within 10 days of receiving it. This includes LTD payments. If you do not report and Social Security discovers the income later—through tax records, bank statements, or the insurance company itself—you may be overpaid.

An overpayment means Social Security sent you more in SSDI than you were may have access to to receive. The agency will ask you to repay the overpaid amount. They can do this by reducing your future SSDI checks, asking for a lump-sum repayment, or in some cases, referring the debt to a collection agency. Reporting on time protects you from this situation.

You can report income changes by calling Social Security at 1-800-772-1213, visiting your local Social Security office, or using your online account at ssa.gov if you have created one. Have your LTD payment amount and the date you received it ready when you call.

Long-term disability settlements and lump-sum payments

If you settle your LTD claim and receive a large lump-sum payment instead of monthly checks, Social Security counts this differently than ongoing monthly income. The agency will count the settlement as income in the month you receive it, which could cause a significant overpayment if the amount is large enough.

However, Social Security has a rule called deeming that may help. If you can show that the settlement is meant to cover multiple months of benefits, the agency may spread the income across those months rather than counting it all at once. This requires documentation from the insurance company or settlement agreement showing the period the payment covers.

Before you accept any LTD settlement, contact your local Social Security office to discuss how the lump sum will affect your SSDI. They can sometimes help you structure the settlement in a way that minimizes the impact on your benefits. This conversation is worth having before you sign anything, because once the settlement is final, it is difficult to undo.

When long-term disability does not affect your SSDI

In rare cases, LTD income may not reduce your SSDI. This happens if your countable LTD income, after deductions, stays below the SGA limit. For example, if you receive $1,200 per month in LTD after taxes and premium deductions, and the SGA limit is $1,550, you would have no reduction to your SSDI benefit.

Additionally, if you are on Supplemental Security Income (SSI) rather than SSDI, different rules explore. SSI has a lower income limit ($943 per month in 2024) and allows a larger deduction for unearned income ($65 per month plus half of the remainder). You should contact Social Security to confirm which program you are on and how your specific LTD income will be treated.

Some people also receive LTD from a source other than their employer—for example, a private disability insurance policy they purchased themselves. The counting rules are the same, but the deductions available may differ slightly depending on how the policy was structured and whether you paid the premiums with pre-tax or after-tax dollars.

Planning ahead if you are considering long-term disability

If you are currently on SSDI and thinking about filing for long-term disability through your employer, or if you are in the early stages of an LTD claim, it is worth understanding the income impact before you proceed. Some people choose to decline LTD or delay filing because the reduction in SSDI would leave them with less total income than they receive now.

Others find that the combination of LTD and reduced SSDI is still more than SSDI alone, so the trade-off makes sense. The math is different for everyone depending on your benefit amount, the LTD payment offered, and your other income sources.

You can request a benefit estimate from Social Security before you make a decision. Call 1-800-772-1213 and ask them to calculate what your SSDI would be if you received a specific LTD amount. This gives you concrete numbers to compare against the LTD offer you are considering.

Frequently Asked Questions

Will my SSDI stop completely if I receive long-term disability?

Not necessarily. Your SSDI will stop only if your countable LTD income exceeds your monthly SSDI benefit amount and pushes you over the SGA limit. If your LTD is $1,200 and your SSDI is $1,400, for example, your SSDI would reduce but not stop. However, if your LTD is $2,000 and your SSDI is $1,400, your SSDI would stop because you exceed the SGA limit.

Can I appeal if Social Security reduces my SSDI because of long-term disability income?

You can request reconsideration if you believe Social Security made an error in how they counted your LTD income—for example, if they failed to deduct taxes or your insurance premiums. However, if the math is correct and you truly exceed the SGA limit, the reduction is not appealable. The SGA limit is set by law and applies to everyone.

What if my long-term disability payment is temporary and will end in a few years?

You must report your LTD income every month while you receive it. When the LTD payments end, your SSDI will return to its full amount (assuming you still meet the disability requirements). Social Security does not reduce your benefit in advance because a payment will end later.

Does my spouse's long-term disability count as my income for SSDI purposes?

No. Social Security counts only your own income when determining your SSDI benefit. Your spouse's LTD, wages, or other income does not affect your SSDI amount. However, if your spouse is also on SSDI, their LTD income would affect their own benefit.

Should I choose a monthly LTD payment or a lump-sum settlement?

This depends on your SSDI situation and other factors. Monthly payments spread the income impact over time, while a lump sum could cause a large overpayment in a single month. Contact Social Security before deciding to understand how each option would affect your benefits and your overall financial situation.