What you report depends on which disability program you receive from

Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are treated differently on your tax return. SSDI may be taxable depending on your other income; SSI is never taxable. The IRS does not care that you are disabled—it cares what program pays you and how much other money you have.

You will receive a Form SSA-1099 from Social Security in January showing how much you received in the previous year. This form tells you and the IRS the dollar amount, but it does not tell you whether that amount is taxable. That depends on your "combined income," which includes wages, interest, dividends, and half of your SSDI benefits.

If you receive Veterans disability benefits instead, those are never taxable and you do not report them. If you receive workers' compensation for a disability, that is also not taxable. This article covers SSDI and SSI only.

Key Takeaways

  • SSDI is taxable only if your combined income (wages plus half your SSDI plus other income) exceeds $25,000 for a single filer or $32,000 for married filing jointly.
  • SSI is never taxable and you do not report it on your tax return at all.
  • You will receive a Form SSA-1099 in January showing your SSDI or SSI payments; keep this with your tax documents.
  • If you owe taxes on SSDI, you can pay them when you file or request that Social Security withhold taxes from your monthly payment.
  • The IRS has a worksheet in Publication 915 to calculate whether your SSDI is taxable; a tax preparer can do this for you.

How to know if your SSDI is taxable

The IRS uses a formula called "combined income" to decide whether SSDI is taxable. Combined income means: your wages, plus your interest and dividends, plus half of your SSDI benefit, plus any other income you have.

If your combined income is under $25,000 (single filer) or $32,000 (married filing jointly), your SSDI is not taxable. If it is over those amounts, some or all of your SSDI becomes taxable. The exact amount depends on how far over the threshold you go.

Example: You receive $1,200 per month in SSDI ($14,400 per year) and earn $15,000 in wages. Your combined income is $15,000 + $7,200 (half your SSDI) = $22,200. You are under $25,000, so your SSDI is not taxable.

Another example: You receive $1,200 per month in SSDI ($14,400 per year) and earn $20,000 in wages. Your combined income is $20,000 + $7,200 = $27,200. You are over $25,000, so part of your SSDI becomes taxable. The IRS worksheet in Publication 915 shows you exactly how much.

SSI is never taxable

Supplemental Security Income (SSI) does not appear on your tax return at all. You do not report it, and the IRS does not count it as income. This is true even if you have other income that would normally make benefits taxable.

You will still receive a Form SSA-1099 showing your SSI payments, but this is for your records only. Do not include the SSI amount when you calculate your combined income for the SSDI threshold test.

If you receive both SSDI and SSI in the same year, only the SSDI portion may be taxable. The SSI portion is never taxable.

What to do with your Form SSA-1099

Social Security mails Form SSA-1099 to you by January 31 each year. It shows the total amount of SSDI or SSI you received in the previous calendar year, broken down by month. You need this form to file your tax return accurately.

Keep your Form SSA-1099 with your other tax documents. If you file electronically, you may need to enter the information from this form into your tax software or give it to your tax preparer. If you file on paper, you do not attach the form to your return, but you keep it for your records in case the IRS asks questions later.

If you do not receive a Form SSA-1099 by early February, contact Social Security at 1-800-772-1213 or visit your local Social Security office. You can also create a my Social Security account online to view your 1099 information before the physical form arrives.

Paying taxes on SSDI if you owe them

If your combined income is high enough that some of your SSDI becomes taxable, you have two choices: pay the tax when you file your return, or ask Social Security to withhold taxes from your monthly SSDI payment.

Withholding means Social Security takes a percentage out of your check each month and sends it to the IRS. This way you do not owe a large amount when you file. To set up withholding, fill out Form W-4V and send it to your local Social Security office or mail it to Social Security. You can choose to withhold 7%, 10%, 15%, or 25% of your benefit.

If you do not set up withholding and you owe taxes, you pay them like any other tax debt—either with your return or in installments if you cannot pay the full amount at once. The IRS does not treat SSDI taxes differently from other income taxes.

Using Publication 915 to calculate your taxable amount

The IRS publishes Publication 915: Social Security and Equivalent Railroad Retirement Benefits every year. It contains a worksheet that walks you through the calculation step by step. You can read it free from IRS.gov or order a printed copy.

The worksheet asks you to list your wages, interest, dividends, half your SSDI, and any other income. It then tells you whether you owe tax on your SSDI and how much. The math is straightforward but involves several steps, which is why many people with SSDI use a tax preparer or tax software to handle it.

If you use tax software (like TurboTax, H&R Block, or TaxAct), the software usually asks whether you received SSDI and calculates the taxable amount for you. If you work with a tax preparer, bring your Form SSA-1099 and tell them about any wages or other income you had.

What happens if you do not report SSDI on your taxes

If your SSDI is taxable and you do not report it, the IRS will eventually notice. Social Security sends the IRS a copy of every Form SSA-1099, so the IRS knows how much you received. If your tax return does not account for that income, the IRS may send you a notice asking for the missing tax, plus penalties and interest.

The penalty for not reporting income is usually 20% of the unpaid tax, plus interest that compounds daily. It is much cheaper to file an amended return and pay what you owe than to wait for the IRS to contact you.

If you made a mistake on a previous year's return, you can file an amended return using Form 1040-X for any year within the last three years. The IRS will recalculate what you owe and send you a bill or refund.

Frequently Asked Questions

Do I have to file a tax return if I only receive SSDI?

Only if your SSDI is taxable based on your combined income. If you have no other income and your combined income is under the threshold ($25,000 single, $32,000 married), you do not have to file. However, if you had taxes withheld from your SSDI, you should file to get a refund.

What if I work part-time and receive SSDI?

Your wages count toward your combined income, which may make your SSDI taxable. You must report both your wages and your SSDI on your tax return. Use Publication 915 to calculate how much of your SSDI is taxable based on your total combined income.

Can I deduct disability-related expenses on my taxes?

You may be able to deduct certain medical expenses, including those related to your disability, if they exceed 7.5% of your adjusted gross income. This is a separate calculation from whether your SSDI is taxable. A tax preparer can advise you on what qualifies.

What if I received SSDI for only part of the year?

Your Form SSA-1099 will show only the months you received benefits. Use that amount (not a full year) when you calculate your combined income. If you started or stopped SSDI mid-year, your taxable amount may be different than someone who received it all year.

Is there a phone number I can call to ask about my specific tax situation?

The IRS has a free helpline at 1-800-829-1040, but they handle general questions only. For your specific situation, a tax preparer, a free tax clinic (through VITA or Tax-Aide), or a CPA can give you personalized guidance based on your income and circumstances.