Most people on SSDI pay no federal income tax on their benefits
Whether you pay federal income tax on your SSDI depends on your combined income—not just what Social Security sends you. Combined income includes your SSDI payments, wages, interest, dividends, and certain other money coming in. If your combined income stays below a threshold set by the IRS, you owe nothing. If it crosses that threshold, a portion of your benefits becomes taxable.
The threshold is low enough that most people receiving only SSDI pay no tax. But if you also work, have a pension, or receive other income, you may cross it. The rules are the same whether you receive SSDI or regular Social Security retirement benefits.
Key Takeaways
- You calculate whether SSDI is taxable using "combined income," which includes your SSDI plus wages, interest, pensions, and other income.
- If your combined income is below $25,000 (single) or $32,000 (married filing jointly), you pay no federal tax on SSDI.
- If combined income exceeds those thresholds, up to 50% or 85% of your SSDI becomes taxable, depending on how far over you go.
- You report SSDI on your tax return using the amount shown on your SSA-1099 form, which Social Security mails each January.
- State income tax on SSDI varies by state—some states tax it, most do not, and a few have special rules for disability recipients.
How the IRS calculates whether your SSDI is taxable
The IRS uses a two-tier system. Your first step is to add up your combined income: half of your annual SSDI plus all your other income (wages, self-employment, interest, dividends, pensions, rental income, and certain other sources). Do not include food stamps, SSI, or most other means-tested benefits.
If that combined income total is below $25,000 (or $32,000 if you are married filing jointly, or $0 if you are married filing separately), you owe no federal tax on your SSDI. If it exceeds $25,000 or $32,000, the IRS taxes a portion of your benefits. The exact amount depends on how far over the threshold you go and is calculated using a formula the IRS publishes each year.
The taxable portion can be as much as 50% of your benefits if your combined income is between the first and second threshold, or as much as 85% if your combined income is above the second threshold. Very few people hit the 85% mark unless they have substantial other income.
What income counts toward the threshold
Combined income includes wages from work, net self-employment income, interest (even if you do not receive it in cash), dividends, capital gains, rental income, pension payments, and distributions from retirement accounts. It also includes certain foreign income and income from U.S. possessions.
Combined income does not include Supplemental Security Income (SSI), food stamps, housing information, or most other means-tested benefits. It does not include the first $65 of unearned income per month or the first $780 of earned income per month (these figures change yearly). If you receive a lump-sum payment from Social Security for past benefits, only half of that counts toward combined income.
If you are married and file jointly, you combine your income with your spouse's income, even if your spouse does not receive SSDI. This can push you over the threshold even if your SSDI alone would not.
The two income thresholds and what they mean
| Filing Status | First Threshold | Second Threshold |
|---|---|---|
| Single | $25,000 | $34,000 |
| Married Filing Jointly | $32,000 | $44,000 |
| Married Filing Separately | $0 | $0 |
If your combined income falls between the first and second threshold, up to 50% of your SSDI becomes taxable. If it exceeds the second threshold, up to 85% becomes taxable. The IRS worksheet in the instructions for Form 1040 walks you through the exact calculation, or you can use the Social Security Administration's online calculator.
These thresholds have not changed since 1984, even though the cost of living has risen significantly. That means more people cross them each year as wages and other income grow.
How to report SSDI on your tax return
In January, the Social Security Administration mails you a Form SSA-1099 showing the total SSDI you received in the previous year. You use this form to fill out your federal tax return. The amount on the SSA-1099 goes on line 5b of Form 1040 (or the equivalent line on other forms if you file a different type of return).
You do not need to file a return at all if your income is below the filing threshold for your age and filing status—but if any of your SSDI is taxable, you must file to pay the tax owed. If you have taxes withheld from other income (like wages), you may want to file even if you do not owe, because you might receive a refund.
If you think your SSDI will be taxable, you can ask Social Security to withhold federal income tax from your monthly payment. You do this by filling out Form W-4V and sending it to your local Social Security office. Withholding makes it easier to avoid owing a large amount when you file.
State income tax on SSDI
Most states do not tax SSDI benefits at all. However, a handful of states do tax some or all of it: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont tax SSDI under certain conditions or for certain income levels. The rules vary significantly from state to state.
Some states exempt SSDI entirely if you meet income or age requirements. Others tax it the same way the federal government does. A few states have their own thresholds that are higher or lower than the federal thresholds. If you live in one of these states and receive SSDI, contact your state tax authority or a tax professional to understand your obligation.
You report state income tax on your state return, not your federal return. The instructions for your state's return will tell you whether to include SSDI and how to calculate it.
What happens if you do not pay tax owed on SSDI
If you owe federal income tax and do not pay it, the IRS can assess penalties and interest on the unpaid amount. The penalty is usually 5% per month of the unpaid tax (up to 25% total), and interest accrues daily. If you file late, there is an additional late-filing penalty.
If you cannot pay the full amount when you file, you can request a payment plan from the IRS. You can also request an extension to file your return (though this does not extend the time to pay). The sooner you contact the IRS, the more options you have to resolve the debt.
If you think you made a mistake on a prior return, you can file an amended return (Form 1040-X) within three years of the original filing date. This can result in a refund if you overpaid, or you may owe additional tax if you underpaid.
Frequently Asked Questions
If I work part-time and receive SSDI, will my wages push me over the income threshold?
Possibly. Your combined income includes all your wages plus half your SSDI. If the total exceeds $25,000 (single) or $32,000 (married filing jointly), some of your SSDI becomes taxable. The first $780 of earned income per month does not count, but anything above that does. A tax professional can calculate your exact liability based on your specific wages and SSDI amount.
Do I have to file a tax return if only SSDI is taxable and I have no other income?
You must file if any of your SSDI is taxable, even if it is your only income. However, if your total income (including the taxable portion of SSDI) is below the filing threshold for your age and filing status, you are not required to file. The Social Security Administration's online calculator can tell you whether you must file.
Can I reduce my taxable SSDI by claiming deductions?
Standard deductions lower your overall taxable income, but they do not directly reduce the amount of SSDI that becomes taxable. The IRS calculates taxable SSDI using combined income first, then applies deductions to your total income. However, reducing other income (such as by contributing to a traditional IRA) can lower your combined income and reduce taxable SSDI.
What if I receive SSDI and my spouse receives regular Social Security retirement?
If you file jointly, you combine both incomes to calculate combined income. Half of your SSDI plus half of your spouse's Social Security plus all other income determines whether either benefit is taxable. This can push you over the threshold even if each benefit alone would not be taxable.
Will receiving a lump-sum back-payment of SSDI push me into a higher tax bracket?
A lump-sum payment can increase your combined income for that year, potentially making more of your benefits taxable. However, only half the lump-sum counts toward combined income. You may be able to spread the tax impact across multiple years using special IRS rules for lump-sum Social Security payments, which a tax professional can help you navigate.