Most people on SSDI do not file federal income taxes

Social Security Disability Insurance (SSDI) benefits are not counted as income for federal tax purposes. This means that in most cases, you will not owe federal income tax on your SSDI payments alone, and you will not need to file a federal tax return just because you receive SSDI.

However, the rule changes if you have other income. If you earned wages from work, received interest or dividends, or had other sources of income during the year, you may need to file a return even though your SSDI itself is not taxable. The threshold for filing depends on your age, filing status, and the type and amount of other income you received.

The Internal Revenue Service (IRS) publishes income thresholds each year that determine who must file. These thresholds are different for people over 65 and for people who are blind. If your total income from all sources falls below the threshold for your situation, you do not have to file.

Key Takeaways

  • SSDI payments themselves are never taxed as federal income, so receiving SSDI alone does not require you to file a tax return.
  • You must file a federal tax return if you have other income (wages, interest, self-employment income) that exceeds the IRS filing threshold for your age and status.
  • The IRS filing thresholds change each year and are higher for people age 65 and older.
  • Some states tax SSDI, so you may need to file a state return even if you do not file federally.
  • If you work and earn wages while on SSDI, you will almost certainly need to file a federal return because earned income counts toward the threshold.

When you have other income besides SSDI

If you received wages from a job, self-employment income, interest, dividends, rental income, or other money during the tax year, you need to check whether your total income exceeds the IRS filing threshold. SSDI does not count toward this threshold, but everything else does.

For example, if you are under 65 and single, and you earned $14,600 in wages during the year, you would need to file a federal return even though your SSDI is not taxable. The threshold for a single person under 65 was $14,600 for the 2023 tax year, but this amount changes annually. You can find the current year's thresholds on the IRS website or by calling the IRS at 1-800-829-1040.

If you are married and file jointly, the threshold is higher. If you are 65 or older, the threshold is also higher. The IRS provides a worksheet or interactive tool to help you determine whether you must file based on your specific situation.

Self-employment income and SSDI

If you are self-employed or have a side business, you must file a federal tax return if your net self-employment income is $400 or more, regardless of your age or other income. This is true even if you receive SSDI and have no other income. Self-employment income is treated differently from wages because you also owe self-employment tax (Social Security and Medicare tax) on that income.

Self-employment income can affect your SSDI benefits in another way: Social Security counts your earnings toward the substantial gainful activity (SGA) limit, which is the amount you can earn per month before your benefits are reduced or stopped. For 2024, the SGA limit is $1,550 per month for non-blind individuals and $2,590 for blind individuals, but these amounts change each year. If your self-employment income pushes you over the SGA limit, Social Security will reduce or suspend your benefits, separate from any tax filing requirement.

State income taxes and SSDI

Most states do not tax SSDI benefits. However, a small number of states do tax some or all of your SSDI income. These states are Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. If you live in one of these states, you may need to file a state income tax return even if you do not file a federal return.

Each state has its own rules about how much SSDI is taxable and what income thresholds explore. Some states tax SSDI only if your total income exceeds a certain amount. Others tax a portion of your SSDI based on your total income, similar to the federal rules for Social Security retirement benefits. Contact your state's tax department or visit their website to learn the specific rules for your state.

How to find your filing threshold

The IRS publishes filing requirement tables each year in Publication 17, "Your Federal Income Tax." You can read this publication free from the IRS website at irs.gov, or you can call 1-800-829-3676 to request a copy by mail.

The tables in Publication 17 are organized by filing status (single, married filing jointly, head of household, etc.) and by age. Find the row that matches your situation, and look at the income threshold listed. If your total income from all sources (excluding SSDI) is less than the threshold, you do not have to file. If it is equal to or greater than the threshold, you must file.

You can also use the IRS Interactive Tax Assistant tool on the IRS website. This tool asks you questions about your age, filing status, and income, and tells you whether you must file a federal return.

What happens if you do not file when you should

If you are required to file a federal tax return and you do not, the IRS may send you a notice. If you owe taxes, you will owe interest and penalties on top of the tax amount. If you are due a refund, you will not receive it unless you file.

Filing a return when you have other income is also important because it creates an official record of your earnings. Social Security uses tax returns to verify your work history and earnings record, which affects your future benefits and the benefits of your family members if you become unable to work.

If you realize you should have filed in a previous year, you can still file a late return. The IRS generally does not penalize you for filing late if you are due a refund. If you owe taxes, filing late will result in interest and penalties, but filing is still better than not filing.

Frequently Asked Questions

Do I have to file taxes if I only receive SSDI and no other income?

No. SSDI is not taxable income, so if SSDI is your only income, you do not have to file a federal tax return. However, if you live in a state that taxes SSDI, you may need to file a state return. Check your state's tax rules to be sure.

What if I worked part of the year and received SSDI the rest of the year?

You must file a federal return if your wages for the year exceed the IRS filing threshold for your age and status. SSDI does not count toward this threshold, but your wages do. Even if you only worked for a few months, your total wages for the year determine whether you must file.

Can I file taxes if I do not have to?

Yes. You can file a federal tax return even if you are not required to. Many people file voluntarily because they are due a refund or because they want an official record of their income. Filing voluntarily does not cause any problems with your SSDI benefits.

Does filing taxes affect my SSDI benefits?

Filing a tax return does not directly affect your SSDI benefits. However, if you have earned income, that income may affect your benefits through the substantial gainful activity limit. Social Security monitors your earnings regardless of whether you file taxes, so filing does not change how your earnings are counted.

What if I owe taxes but cannot pay?

Contact the IRS to discuss payment options. The IRS offers payment plans, installment agreements, and other options for people who cannot pay their full tax bill at once. You can call 1-800-829-1040 or visit irs.gov to learn about your options. Do not ignore a tax bill, because interest and penalties will continue to grow.