SSDI Does Not Withhold Taxes Automatically
Social Security Disability Insurance (SSDI) payments arrive without federal income tax withheld. The Social Security Administration does not remove taxes from your monthly benefit check the way an employer does from a paycheck. This means you may owe taxes at the end of the year even though no money was taken out during the year.
Whether you actually owe federal income tax on your SSDI depends on your total income and filing status. Some people with SSDI owe nothing. Others owe a portion of their benefits as tax. The only way to know is to look at your complete income picture — SSDI plus any wages, interest, pensions, or other money you received.
You can request that Social Security withhold taxes voluntarily if you want to avoid a tax bill in April. This is optional, but many people choose it to spread the cost across the year instead of paying a lump sum later.
Key Takeaways
- SSDI payments have no federal income tax withheld by default, so you may owe taxes when you file your return even if you received no tax refund.
- You owe tax on SSDI only if your total income exceeds a threshold that depends on your filing status and whether you have other income sources.
- You can request voluntary withholding on Form W-4V, which tells Social Security to remove a percentage of your monthly payment for taxes.
- The IRS publishes a worksheet each year to help you figure out whether any of your SSDI is taxable, based on your specific situation.
- If you do not request withholding and end up owing tax, you can pay the IRS directly or set up a payment plan.
When SSDI Benefits Become Taxable Income
SSDI is taxable income to the IRS, but not all of it is taxed for all people. The IRS uses a formula based on your combined income, which includes your SSDI plus half of your SSDI plus all your other income (wages, interest, pensions, rental income, and so on).
If your combined income is below a certain threshold, none of your SSDI is taxable. If it is above that threshold, up to 85 percent of your SSDI may be taxable. The thresholds are:
- Single filers: $25,000
- Married filing jointly: $32,000
- Married filing separately: $0 (if you lived with your spouse at any time during the year)
These thresholds have not changed since 1984 and do not adjust for inflation. If your combined income is $25,001 and you file single, some of your SSDI is taxable. The exact amount depends on how far over the threshold you are.
Example: You are single and receive $1,500 per month in SSDI ($18,000 per year). You also earned $10,000 in wages. Your combined income is $10,000 + $9,000 (half your SSDI) + $18,000 = $37,000. This is $12,000 over the $25,000 threshold, so a portion of your SSDI is taxable.
How to Request Voluntary Tax Withholding
To have Social Security withhold taxes from your SSDI payment, you must complete Form W-4V (Voluntary Withholding Request). You can obtain this form from the Social Security website, your local Social Security office, or by calling 1-800-772-1213.
On the form, you choose a withholding rate: 7 percent, 10 percent, 15 percent, or 25 percent of your monthly benefit. You do not specify a dollar amount — you choose a percentage. The amount withheld each month depends on your benefit amount and the percentage you select.
You can submit Form W-4V by mail to your local Social Security office, in person at an office, or online through your my Social Security account. If you submit it online or in person, the change usually takes effect the following month. If you mail it, allow 10 to 14 days for processing.
You can change your withholding rate or cancel it at any time by submitting a new Form W-4V. There is no penalty for changing your mind, and you can adjust it if your income or tax situation changes.
Calculating Your Tax Liability on SSDI
The IRS publishes a worksheet in Publication 915 each year to help you determine whether your SSDI is taxable and how much. The worksheet walks you through the combined income calculation step by step. You will need your SSDI statement (Form SSA-1099), your W-2 forms from any employment, and documentation of any other income.
The calculation is not straightforward because it involves two tiers of taxation. The first tier taxes up to 50 percent of your benefits if your combined income exceeds the first threshold. The second tier taxes up to an additional 35 percent if your combined income exceeds a second threshold ($34,000 for single filers, $44,000 for married filing jointly). Together, these can result in up to 85 percent of your benefits being taxable.
Many people find the worksheet confusing and choose to work with a tax preparer or use tax software that handles SSDI calculations. If you do your own taxes, the IRS worksheet is free and available on the IRS website. You do not need to pay for help unless you want it.
What Happens If You Owe Tax and Did Not Request Withholding
If you file your tax return and discover you owe federal income tax on your SSDI, you have several options. You can pay the full amount when you file, or you can request a payment plan from the IRS if you cannot pay in full.
The IRS offers short-term payment plans (120 days or fewer) at no cost and long-term installment agreements (longer than 120 days) for a setup fee. The fee varies depending on how you set up the plan, but ranges from $31 to $225. If you set up automatic payments from your bank account, the fee is lower.
If you owe tax in future years and want to avoid this situation, you can request withholding on Form W-4V starting when ready. The withholding will explore to your next payment and continue each month until you cancel it.
SSDI and State Income Tax Withholding
Federal income tax withholding and state income tax withholding are separate. Some states do not tax SSDI at all. Others tax it the same way the federal government does. A few states have their own rules.
If you live in a state that taxes SSDI and you want to have state tax withheld, you must request it separately. Form W-4V is for federal withholding only. Contact your state tax authority or your state's equivalent of Social Security to learn whether your state taxes SSDI and how to request withholding.
States that do not tax SSDI include Alaska, Florida, Illinois, Louisiana, Mississippi, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you do not owe state income tax on your SSDI. If you live elsewhere, check your state's tax website or contact your state revenue department to confirm the rules.
Frequently Asked Questions
Can I request withholding if I am already receiving SSDI?
Yes. You can request withholding at any time by submitting Form W-4V to Social Security. You do not have to be newly approved for SSDI. The withholding will begin the month after Social Security processes your form.
What percentage should I choose for withholding?
That depends on your total income and tax situation. If you have little other income, 7 or 10 percent may be enough. If you have wages or other income, you may need 15 or 25 percent. Use the IRS Publication 915 worksheet to estimate your tax liability, then divide by 12 months to see what monthly withholding you need.
Do I have to file a tax return if I receive SSDI?
Only if your income exceeds the filing threshold for your age and filing status. The threshold is higher than the SSDI taxability threshold, so you may owe tax on SSDI without being required to file. However, if you had taxes withheld, you should file to claim a refund.
What if my income changes during the year?
You can change your withholding rate at any time by submitting a new Form W-4V. If you expect your income to drop, you can reduce withholding. If you expect it to rise, you can increase withholding or request a larger amount.
Does requesting withholding affect my SSDI payment amount?
Yes, but only the amount you receive each month. Your benefit amount stays the same, but the withholding is subtracted before the payment reaches your bank account. For example, if your benefit is $1,500 and you request 10 percent withholding, you receive $1,350.