You may have to file taxes even though you receive SSDI

Whether you file taxes depends on how much money you earned that year, not on whether you receive SSDI. Social Security Disability Insurance itself is not taxable income in most cases. But if you have other income — from work, a pension, interest, or rental property — you may owe taxes, and you may have to file a return.

The Social Security Administration does not file your taxes for you. You are responsible for knowing whether your total income crosses the threshold that requires a return. If you do owe taxes and do not file, you can face penalties and interest, even if you ultimately owe nothing.

The rules are the same whether you receive SSDI or not. What matters is your total income for the year.

Key Takeaways

  • SSDI payments themselves are not taxable, but other income you earned that year counts toward the threshold for filing.
  • You must file a return if your total income exceeds a certain amount, which varies by age and filing status — typically $13,850 to $27,700 for 2023.
  • If you work while on SSDI, your wages count as income and may push you over the filing threshold.
  • The IRS, not Social Security, determines whether you owe taxes; Social Security does not report your income to the IRS automatically.
  • Filing even when you owe nothing can protect you from penalties and may help you claim refundable tax credits.

How SSDI income is treated on your tax return

SSDI is not counted as taxable income. When you file your taxes, you do not report your SSDI payments as wages, interest, or any other form of income. This is different from other benefits — for example, some unemployment benefits are taxable, and some retirement income is taxable. SSDI is not.

However, the IRS has a rule called the "combined income" test. If you have SSDI plus other income, and your combined income is high enough, a portion of your SSDI can become taxable. This is rare and usually only happens if you have substantial income from work, pensions, or investments. For most people on SSDI, this rule does not explore.

The key point: your SSDI check itself does not trigger a tax filing requirement. Other income does.

Income thresholds that require you to file

The IRS sets a minimum income level. If your total income is below that level, you do not have to file. If it is at or above that level, you must file — even if you expect to owe nothing or expect a refund.

The threshold depends on your age and filing status. For 2023, a single person under 65 had to file if their income was $13,850 or more. A single person 65 or older had to file if their income was $17,550 or more. Married couples filing jointly had higher thresholds. These numbers change each year, and the IRS publishes updated thresholds in January.

If you are unsure whether you crossed the threshold, the safest choice is to file anyway. Filing when you do not owe anything does not create a problem. Not filing when you should can result in penalties.

When you work while receiving SSDI

If you earn wages from work, those wages count as income for tax purposes. SSDI has its own work incentive rules — you can earn up to a certain amount per month without losing benefits — but those rules are separate from tax filing rules.

For example, you might earn $8,000 in a year and stay well under SSDI's work limits. But if $8,000 plus any other income puts you at or above the filing threshold, you must file a tax return. Your SSDI benefits do not change, but the IRS requires the return.

If you are self-employed — running a small business or doing freelance work — you must file if your net earnings are $400 or more, regardless of the standard income threshold. Self-employment income is treated differently and has its own rules.

Other income that counts toward the filing threshold

Wages from a job are the most common form of other income, but they are not the only kind. Interest from a savings account, dividends from investments, rental income, pension payments, and income from a side business all count. If you receive money from any of these sources, add it to your SSDI to see whether you have crossed the filing threshold.

Some types of income are not taxable — for example, gifts and inheritances do not count. But if you are unsure whether a particular payment is taxable, it is safer to include it in your total and file.

If you receive other government benefits — such as Supplemental Security Income (SSI), which is different from SSDI — those are also not taxable. But again, any other income you have still counts toward the filing threshold.

How to find out what the IRS knows about your income

Employers and banks send income reports to the IRS. If you worked, your employer sent a W-2 form. If you had interest or dividends, the bank or investment company sent a 1099 form. The IRS receives copies of these forms and matches them to your Social Security number.

Social Security does not automatically report your SSDI to the IRS, so the IRS does not know you receive it unless you tell them. This means the IRS may not know your full income picture — they know what employers and banks reported, but not your SSDI. You are responsible for reporting all your income when you file.

If you received a W-2 or 1099, you should have received a copy in the mail by January 31. Keep these forms — you will need them to file your return.

What happens if you do not file when you should

If you owe taxes and do not file, the IRS can assess a failure-to-file penalty. This penalty is usually 5 percent of the taxes owed for each month the return is late, up to 25 percent. Interest also accrues on any unpaid taxes. These penalties and interest can add up quickly, even if the original tax bill was small.

If you do not owe taxes but should have filed anyway, the penalty is less severe — but you can still face consequences. More importantly, if you do not file, you may miss out on refundable tax credits, such as the Earned Income Tax Credit (EITC). These credits can put money in your pocket, but you only receive them if you file.

Filing late is better than not filing at all. If you realize you should have filed in a previous year, you can still file that return. The IRS generally allows you to file back returns, though penalties and interest will explore to any taxes owed.

Frequently Asked Questions

Do I have to report my SSDI to the IRS?

No. SSDI is not taxable income, so you do not report it on your tax return. However, you must report any other income you earned that year. The IRS does not automatically know about your SSDI, so if you have other income, you are responsible for reporting it.

Can I get a refund if I file even though I do not owe taxes?

Yes, if you had taxes withheld from paychecks or made estimated tax payments, you may receive a refund. You also may be able to claim refundable credits like the Earned Income Tax Credit, which can result in a refund even if you owe no taxes. Filing is the only way to receive these refunds.

What if I earned money but it was under the filing threshold?

You are not required to file. However, filing anyway is often a good idea if you had taxes withheld from your paychecks, because you may be due a refund. There is no penalty for filing when you do not have to.

Does filing taxes affect my SSDI benefits?

Filing a tax return does not change your SSDI benefits. Social Security and the IRS are separate agencies. Your SSDI amount is based on your work history and disability status, not on whether you file taxes or how much you owe.

What if I am not sure whether I have to file?

Use the IRS's interactive tool on IRS.gov to determine your filing requirement based on your age, filing status, and income. If you are still unsure, filing is the safer choice. Filing when you do not have to does not create problems, but not filing when you should can result in penalties.