Most SSDI recipients do not have to report their benefits as income on their federal tax return

Social Security Disability Insurance (SSDI) is not taxable income under federal law. This means you do not include your SSDI payment amount on your Form 1040 or any other federal tax form, and you do not owe federal income tax on the money itself.

However, SSDI can affect whether you owe tax on other income you receive — such as wages, interest, or pensions. The rule depends on your "combined income," which is a calculation the IRS uses to determine if part of your benefits become taxable. For most SSDI recipients, especially those with little or no other income, this is not a problem. But if you work, receive a pension, or have investment income, you need to understand how the combined income calculation works.

The Social Security Administration (SSA) sends you a Form SSA-1099-SM each January showing the total SSDI you received the previous year. You do not report this amount as income on your tax return. Instead, you use it only to calculate combined income if you have other sources of income.

Key Takeaways

  • SSDI payments themselves are never taxable federal income and do not go on your tax return.
  • If you have no other income besides SSDI, you almost certainly owe no federal income tax and do not need to file a return.
  • If you work or receive other income, you must calculate your combined income to see if any of your SSDI becomes taxable.
  • Combined income is calculated as your adjusted gross income plus nontaxable interest plus half of your SSDI benefits.
  • State tax rules vary; some states tax SSDI and some do not, regardless of federal rules.

When combined income makes part of your SSDI taxable

The IRS uses a two-tier system to decide if any of your SSDI becomes taxable. The thresholds are the same whether you are single or married filing jointly, and they have not changed since 1984.

Your combined income is calculated as: your adjusted gross income (AGI) + nontaxable interest + one-half of your SSDI benefits. If your combined income exceeds $25,000 (single) or $32,000 (married filing jointly), up to 50 percent of your benefits may become taxable. If it exceeds $34,000 (single) or $44,000 (married filing jointly), up to 85 percent of your benefits may become taxable.

For example: You are single and receive $1,200 per month in SSDI ($14,400 per year). You also work part-time and earn $15,000 in wages. Your combined income is $15,000 (AGI) + $0 (nontaxable interest) + $7,200 (half your SSDI) = $22,200. This is below $25,000, so none of your SSDI is taxable. You owe tax only on your $15,000 in wages.

A different example: You are single, receive $1,200 per month in SSDI, and receive $20,000 in pension income. Your combined income is $20,000 + $0 + $7,200 = $27,200. This exceeds $25,000 by $2,200. Up to 50 percent of your benefits may become taxable. The IRS uses a worksheet to calculate the exact amount, but roughly $1,100 of your SSDI would be taxable income on your return.

How to report taxable SSDI on your return

If you determine that part of your SSDI is taxable, you report it on Form 1040, line 5b (or the equivalent line on your tax form). You do not use the Form SSA-1099-SM directly; instead, you use the IRS worksheet in the Form 1040 instructions or Publication 915 to calculate the taxable amount.

The Form SSA-1099-SM shows your total SSDI in box 5. You use this number in the combined income calculation, but you do not copy it onto your return. Only the taxable portion (if any) goes on line 5b.

If you use tax software, the program will walk you through the combined income calculation and tell you whether any of your SSDI is taxable. If you file by hand, Publication 915 (Social Security and Equivalent Railroad Retirement Benefits) contains the official worksheet and examples.

State income tax and SSDI

Federal rules do not explore to state income tax. Some states do not tax SSDI at all, regardless of your combined income. Other states follow the federal rule. A few states have their own thresholds or rules.

States that do not tax SSDI include Alabama, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming. This list changes occasionally, so check your state's tax agency website if you are unsure.

If you live in a state that does tax SSDI, you will need to report the taxable portion on your state return as well. Some states use the federal calculation; others do not. Contact your state's tax agency or a tax professional for your state's specific rules.

When you must file a return even if SSDI is not taxable

You do not have to file a federal return if your only income is SSDI and it is not taxable. However, you must file if you have other income that exceeds the filing threshold for your age and filing status.

For 2023, the standard deduction was $13,850 for a single person under 65 and $17,550 for a single person 65 or older. If your wages, self-employment income, or other earned income exceeds these amounts, you must file a return even if none of your SSDI is taxable. If you have unearned income (interest, dividends, pensions), the threshold is lower.

You may also want to file even if you are not required to, because you may be due a refund of taxes withheld from wages or a tax credit such as the Earned Income Tax Credit (EITC). SSDI itself does not reduce your EITC, but your other income does.

How work incentives affect your tax situation

If you are using a work incentive such as Impairment Related Work Expenses (IRWE) or a Plan to Achieve Self-Support (PASS), these reduce your countable earnings for SSDI purposes but do not reduce your taxable income for tax purposes. You still report your full wages on your tax return.

For example, if you earn $2,000 per month but claim $400 per month in IRWE, SSA counts only $1,600 toward your SSDI earnings limit. However, the IRS counts the full $2,000 as your income for tax purposes. This means you may owe more tax than you expected, even though your SSDI payment was not reduced.

Work incentives do not create a tax deduction. If you use IRWE, you deduct those expenses on Schedule C (if self-employed) or as a miscellaneous deduction (if employed), not as a reduction to your reported wages.

What to do if you receive a Form SSA-1099-SM with an error

If the Form SSA-1099-SM shows an incorrect amount, contact SSA directly. You can call 1-800-772-1213 or visit your local Social Security office. Do not file your tax return until the error is corrected, because the IRS may match the amount on your return against SSA's records.

If you disagree with the amount shown, ask SSA to issue a corrected Form SSA-1099-SM. Once you receive the corrected form, you can file your return. If you have already filed and the form was wrong, you can file an amended return (Form 1040-X) once you receive the corrected form.

Frequently Asked Questions

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

No. If SSDI is your only income and none of it is taxable (which is true for most recipients), you do not have to file a federal return. However, you may want to file anyway if you had taxes withheld from other income or if you think you might be due a refund or tax credit.

What if I work and receive SSDI — do I report both on my tax return?

You report your wages on your return as usual. You do not report the SSDI amount itself, but you use it to calculate combined income to see if any of your SSDI becomes taxable. If it does, you report the taxable portion on line 5b of your Form 1040.

Can I deduct my work expenses from my SSDI?

No. Work expenses reduce your countable earnings for SSDI purposes (if you use IRWE or PASS), but they do not reduce your taxable income for the IRS. You report your full wages on your tax return and deduct work expenses separately if you may have access to.

What if I live in a state that taxes SSDI?

You will need to report the taxable portion on your state return. Some states use the federal combined income calculation; others have different rules. Contact your state tax agency to find out what applies to you.

Does receiving SSDI affect my ability to claim dependents or other tax credits?

SSDI itself does not affect your ability to claim dependents or most tax credits. Your may be able to access depends on your income from other sources and your relationship to the dependent. However, SSDI does count as income for some means-tested programs like Medicaid, so check with those programs separately.