Most people on SSDI do not file federal income taxes

Social Security Disability Insurance (SSDI) benefits are generally not taxable income at the federal level. The Internal Revenue Service treats SSDI differently from wages or other income sources. If SSDI is your only income, you will not owe federal income tax and do not need to file a federal return.

The rule changes if you have other income alongside SSDI. If you earn money from work, receive interest or dividends, or have other sources of income, you may need to file even though the SSDI itself is not taxed. The threshold depends on your age, filing status, and the amount of non-SSDI income you received during the year.

State income tax rules vary. Some states do not tax SSDI at all. Others tax SSDI the same way the federal government does—which is to say, they do not. A few states have their own rules, so you should check your state's tax authority website or speak with a tax preparer familiar with your state's rules.

Key Takeaways

  • SSDI benefits themselves are not subject to federal income tax, so if SSDI is your only income, you do not need to file a federal return.
  • If you have other income—from work, investments, or other sources—you must file a federal return if that income exceeds the threshold for your age and filing status.
  • You will receive a Form SSA-1099 each January showing your SSDI payments for the prior year; this is for your records and does not trigger a tax filing requirement by itself.
  • Some states do not tax SSDI, while others follow federal rules; check your state's tax authority to know whether you owe state income tax.
  • If you work and receive SSDI, you may owe taxes on your wages even though your SSDI is tax-free.

When you must file even though SSDI is tax-free

The IRS requires you to file a federal return if your non-SSDI income exceeds a certain threshold. For 2024, that threshold depends on your age and filing status. If you are single and under 65, you must file if your non-SSDI income was $14,600 or more. If you are 65 or older, the threshold is $18,150. These amounts change each year, so check the IRS website or a tax preparer for the current year's threshold.

Non-SSDI income includes wages from work, self-employment income, interest, dividends, rental income, and income from other sources. If you are working while on SSDI and earning wages, those wages count toward the filing threshold. You will owe federal income tax on those wages, even though your SSDI is not taxed.

Some people on SSDI work part-time or use work incentive programs like the Ticket to Work. If you earn any wages, you should track that income carefully and compare it to the filing threshold for your situation. When in doubt, filing is safer than not filing, because the IRS can assess penalties for failing to file when required.

The Form SSA-1099 and what it means

Each January, the Social Security Administration sends you a Form SSA-1099 showing the total SSDI benefits you received in the prior calendar year. This form arrives by mail or, if you have set up a my Social Security account, you can view it online. The form shows your SSDI payments broken down by month.

The SSA-1099 is for your records. It does not mean you owe taxes on that amount. The form exists so you have documentation of your SSDI income if you need it for other purposes—such as proving income to a landlord, a lender, or a government program. You do not send the SSA-1099 to the IRS with your tax return, and receiving it does not trigger a filing requirement.

If you file a federal return for other reasons (because you have non-SSDI income above the threshold, for example), you do not need to report your SSDI on that return. The IRS already knows about your SSDI from Social Security's records.

How work incentives affect your tax situation

If you are using a work incentive program—such as the Ticket to Work, Impairment Related Work Expenses (IRWE), or Plan to Achieve Self-Support (PASS)—your tax filing situation does not change. These programs reduce the amount of SSDI you receive based on your earnings, but they do not make SSDI taxable. You still do not owe federal income tax on the SSDI portion of your benefits.

However, you do owe income tax on the wages you earn. If your earnings are high enough to exceed the filing threshold for your age and status, you must file a federal return. Work incentive programs are designed to let you keep more of your earnings while staying on SSDI, but they do not shield your wages from taxation.

If you are self-employed or running a business while on SSDI, you may also owe self-employment tax in addition to income tax. Self-employment tax funds Social Security and Medicare. A tax preparer or the IRS can help you understand your obligations if you have self-employment income.

State income tax and SSDI

Most states do not tax SSDI benefits. However, a small number of states have different rules. Illinois, for example, does not tax SSDI. New Mexico does not tax SSDI. But some states may tax SSDI under certain circumstances or may have different thresholds than the federal government.

The safest approach is to check your state's tax authority website or contact them directly. You can usually find this information by searching "[your state] income tax SSDI" or by calling your state's department of revenue. If you live in a state that does tax SSDI, you will need to file a state return even if you do not file a federal return.

If you have moved to a new state during the year, you may owe taxes to both states for the portion of the year you lived in each. State tax rules can be complex, so consulting a tax preparer who knows your state's rules is often worth the cost.

What to do if you are unsure whether to file

If you are not sure whether you need to file, the safest choice is to file anyway. Filing when you are not required to does not harm you. If you are owed a refund, filing ensures you get it. If you owe nothing, filing creates a record that you complied with tax law. The IRS can assess penalties for failing to file when required, but filing unnecessarily carries no penalty.

You can file a federal return yourself using free tax software if your income is below a certain threshold (usually around $79,000 for 2024). The IRS Free File program offers free tax preparation software to people with lower incomes. You can also hire a tax preparer or certified public accountant to file for you.

If you have questions about your specific situation, the IRS has a free helpline at 1-800-829-1040. You can also visit IRS.gov and use their interactive tools to determine whether you need to file. For state tax questions, contact your state's tax authority directly.

Frequently Asked Questions

Do I need to report my SSDI on my tax return?

No. SSDI is not reported as income on your federal tax return. If you file a return because you have other income, you do not include SSDI on it. The IRS already has a record of your SSDI from Social Security.

What if I earned money from work while on SSDI?

Your wages are taxable income, separate from your SSDI. If your wages exceed the filing threshold for your age and status, you must file a federal return and pay income tax on those wages. Your SSDI remains tax-free.

Can I file my taxes for free?

Yes. The IRS Free File program offers free tax software to people with incomes below a certain threshold. You can also use free software like IRS Free File Fillable Forms if your income is higher. Many nonprofits also offer free tax preparation for people with lower incomes.

What happens if I do not file when I am supposed to?

The IRS can assess penalties and interest if you fail to file when required. Filing late is better than not filing at all. If you owe taxes, filing late still results in penalties, but not filing at all results in larger penalties and potential legal action.

Does my state tax SSDI?

Most states do not tax SSDI. Check your state's tax authority website or call them to confirm. Some states have different rules than the federal government, so it is worth verifying even if you know the federal rule.