Do You Owe Berkheimer Tax on Your SSDI Benefits?

If you live in Pennsylvania and receive Social Security Disability Insurance, you may have come across the name Berkheimer Tax Innovations — a company that collects local earned income taxes (EIT) for hundreds of municipalities across the state. The question of whether your SSDI benefits are subject to that tax is a reasonable one, and the answer hinges on a distinction that Pennsylvania tax law makes very clearly: earned income versus unearned income.

What Is Berkheimer and What Does It Collect?

Berkheimer Tax Innovations is a tax collection agency, not a government body. Pennsylvania contracts with private collectors like Berkheimer to administer the Local Earned Income Tax (EIT) on behalf of municipalities and school districts. The EIT applies to wages, salaries, net profits from self-employment, and other forms of earned income — money you generate through work or business activity.

Berkheimer collects on behalf of many Pennsylvania communities under the state's local tax system, which is governed by Act 32 of 2008. If you work in or live in a jurisdiction that uses Berkheimer, they handle your EIT filing and remittance.

The Core Question: Is SSDI "Earned Income"?

No. SSDI is not earned income under Pennsylvania's local tax framework — or under federal tax definitions, for that matter.

SSDI is a federal disability benefit paid through the Social Security Administration. It is funded through FICA payroll taxes you paid during your working years, and it is triggered by a qualifying disability, not by current work activity. Because you are not performing services in exchange for your SSDI payments, the IRS and Pennsylvania both classify it as unearned income.

Local earned income taxes administered by collectors like Berkheimer apply only to earned income. SSDI falls outside that definition. 🛑

How Pennsylvania Treats SSDI at the State Level

It's worth separating the local EIT question from Pennsylvania's broader tax picture:

Pennsylvania is one of the more favorable states for SSDI recipients. The PA state income tax does not apply to SSDI benefits. Combined with the local EIT exemption, most Pennsylvania SSDI recipients owe no state or local tax on their disability income.

Federal Taxes Are a Separate Matter

While Berkheimer and Pennsylvania state taxes don't apply to SSDI, federal income tax is a different story. Depending on your total household income, a portion of your SSDI benefit may be taxable at the federal level.

The IRS uses a formula based on your combined income — which includes your adjusted gross income, any nontaxable interest, and half of your SSDI benefit. If that combined figure exceeds certain thresholds, up to 50% or 85% of your benefit may become federally taxable.

For 2024, the general thresholds are:

• $25,000 for single filers
• $32,000 for married filing jointly

These thresholds are set by federal law and do not adjust annually for inflation the way some other tax figures do. If you have other income — wages from a spouse, investment income, part-time work within your trial work period — the calculation becomes more consequential.

What About Pennsylvanians Who Also Work? 🔍

This is where the picture gets more nuanced. SSDI recipients can work limited amounts under SSA's Trial Work Period (TWP) and Extended Period of Eligibility (EPE) rules without immediately losing benefits. If you earn wages from actual employment:

• Those wages are earned income and may be subject to the local EIT collected by Berkheimer
• Your SSDI benefit itself remains exempt from the EIT
• SSA tracks your earnings separately to assess whether you're exceeding Substantial Gainful Activity (SGA) thresholds, which adjust annually

The distinction matters: it's your work-based wages that Berkheimer can tax — not your SSDI check.

What If You Received a Notice from Berkheimer?

If you received a filing notice or inquiry from Berkheimer, it may be because:

• You had other earned income in addition to SSDI
• You live in a jurisdiction that requires residents to file a return even with zero taxable income
• There was an information mismatch based on records they received

Receiving a notice doesn't automatically mean you owe anything. It may simply mean a return needs to be filed — sometimes to report and document that your only income is SSDI, which is exempt.

The Variable That Changes Everything

Whether any of this becomes complicated for you depends on factors that go beyond program rules: whether you have a working spouse, whether you earned wages during a trial work period, what other income streams exist in your household, and how your SSDI onset date and back pay are structured.

The general framework is clear — SSDI is not earned income and is not subject to the local EIT Berkheimer collects. But what your overall tax picture looks like, including whether any portion of your benefit becomes federally taxable, depends entirely on circumstances that no general guide can assess for you.