Most people receiving SSDI do not pay federal income tax on their benefits

Whether you owe taxes on your SSDI depends on your total income for the year, not on SSDI alone. The Social Security Administration (SSA) counts SSDI as income, but the tax code has a threshold: if SSDI is your only income, you almost certainly owe nothing. If you have other income—wages, interest, pensions, or self-employment earnings—you may owe taxes on part of your SSDI.

The calculation is specific. The IRS uses a formula called "combined income" to determine whether any of your SSDI is taxable. Combined income is your adjusted gross income plus nontaxable interest plus half of your SSDI for the year. If that total exceeds a threshold ($25,000 for single filers, $32,000 for married filing jointly), some of your SSDI becomes taxable income.

Even if you owe taxes, the amount is usually smaller than you might expect. The formula means you never pay tax on more than 85 percent of your SSDI, and often much less. Many people in this situation owe taxes on only 50 percent of their benefits.

Key Takeaways

  • If SSDI is your only income, you do not owe federal income tax on it, regardless of the amount.
  • If you have other income, the IRS uses a "combined income" formula to determine whether part of your SSDI is taxable.
  • Combined income is your adjusted gross income plus nontaxable interest plus half your SSDI; if it exceeds $25,000 (single) or $32,000 (married filing jointly), some SSDI becomes taxable.
  • Even when SSDI is taxable, you pay tax on no more than 85 percent of your benefits, and often only 50 percent.
  • Some states do not tax SSDI at all, regardless of your income level.

How the IRS calculates taxable SSDI

The IRS does not straightforward add your SSDI to your other income and tax the total. Instead, it uses a two-tier system that protects a portion of your benefits from tax.

Start with your combined income: take your adjusted gross income (wages, interest, dividends, and other income before the standard deduction), add any nontaxable interest (such as interest from municipal bonds), and add half of your SSDI for the year. If that number is below the threshold for your filing status, you owe no tax on your SSDI. If it exceeds the threshold, the IRS taxes either 50 percent or 85 percent of your SSDI, depending on how far above the threshold you are.

The thresholds have not changed since 1984. For 2024, they remain $25,000 for single filers and $32,000 for married couples filing jointly. (Married filing separately have a threshold of $0, meaning any combined income at all can trigger taxation.) Because these thresholds do not adjust for inflation, more people fall into the taxable range each year, even if their actual income has not risen.

When you have wages or other income alongside SSDI

If you work part-time or have a pension, investment income, or other earnings, you are more likely to owe taxes on part of your SSDI. The combined income formula counts all of these toward the threshold.

For example: you receive $15,000 in SSDI and earn $12,000 in wages. Your combined income is $12,000 (wages) plus $0 (nontaxable interest) plus $7,500 (half of SSDI), which equals $19,500. This is below the $25,000 threshold, so you owe no tax on your SSDI. But if you earned $14,000 instead, your combined income would be $28,500, which exceeds the threshold by $3,500. The IRS would then tax 50 percent of your SSDI up to that excess amount, or $1,750 of your benefits.

Certain types of income do not count toward the threshold. Supplemental Security Income (SSI), workers' compensation, and some veterans' benefits are excluded. Nontaxable portions of pensions may also be excluded, depending on your situation. If you are unsure whether a particular income source counts, the IRS Publication 915 (Social Security and Equivalent Railroad Retirement Benefits) lists the details.

State taxes on SSDI

Federal tax and state tax are separate. Even if you owe no federal income tax on your SSDI, your state may tax it—or may not, depending on where you live.

Most states do not tax SSDI at all. However, a small number do: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont currently tax SSDI as income. The rules vary by state. Some tax SSDI the same way the IRS does (using the combined income formula). Others have their own thresholds or exemptions. A few states tax SSDI only if your total income exceeds a certain level.

If you live in one of these states, contact your state tax authority or check your state's tax guide to understand how SSDI is treated. Many states offer exemptions or deductions for disability income that can reduce or eliminate your state tax liability on SSDI.

Reporting SSDI on your tax return

The SSA sends you a Form SSA-1099 by January 31 each year, showing the total SSDI you received. You use this form to report your benefits on your federal tax return, even if none of your SSDI is taxable.

If you file a Form 1040 or 1040-SR, you report your SSDI on line 5b. The IRS worksheet in the instructions walks you through the combined income calculation. If your combined income is below the threshold, you enter zero on line 5b. If it exceeds the threshold, you calculate the taxable portion using the worksheet and enter that amount.

Many people with SSDI use the IRS Free File program or work with a tax preparer to may support the calculation is correct. If you made an error in a prior year, you can file an amended return (Form 1040-X) to correct it.

What happens if you do not report SSDI income

The IRS receives a copy of your Form SSA-1099, so the agency knows how much SSDI you received. If you do not report it on your return and your combined income exceeds the threshold, the IRS will likely send you a notice of underreported income and a bill for back taxes, penalties, and interest.

Even if you believe none of your SSDI is taxable, filing a return that includes the SSDI information protects you. It shows the IRS that you reported the income and calculated your tax correctly. If you have questions about whether you owe tax, filing a return is safer than not filing.

Frequently Asked Questions

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

No, not if SSDI is your only income and it is below the filing threshold for your age and filing status. However, if you have any other income—even a small amount of interest or wages—you may need to file. The IRS has different thresholds depending on your age and filing status, so check the current year's instructions or use the IRS interactive tool to be sure.

What if I owe taxes on my SSDI but cannot pay?

Contact the IRS directly. You can set up a payment plan, request an extension, or ask about an offer in compromise if you cannot pay in full. The IRS also has hardship programs for people with low income. Call 1-800-829-1040 or visit irs.gov to explore your options.

Can I reduce my SSDI taxes by claiming dependents or deductions?

Yes. The standard deduction reduces your adjusted gross income, which lowers your combined income and may keep you below the taxable threshold. If you support dependents, you may also claim them on your return. Work with a tax preparer or use the IRS Free File program to see how these affect your specific situation.

Does working part-time while on SSDI affect my taxes?

Yes. Wages count toward your combined income, which can push you over the threshold and make part of your SSDI taxable. However, SSDI has its own work rules (the Substantial Gainful Activity limit) that may affect your benefits themselves. Consult with a work incentives planning specialist before taking a job to understand both the tax and benefit consequences.

What if I received SSDI for only part of the year?

Your Form SSA-1099 will show only the SSDI you actually received. Use that amount in the combined income calculation. If you started or stopped SSDI mid-year, the calculation is the same—just use the actual amount shown on the form.