The Short Answer: It Depends on Your Other Income

You may owe federal income tax on part of your Social Security Disability Insurance (SSDI) benefits, but only if your total income from all sources exceeds a certain threshold. The IRS calls this threshold your "combined income," and it includes not just SSDI but also wages, interest, pensions, and other money you receive. Most people receiving SSDI alone pay no federal tax on their benefits, but if you have other income — even a small amount — you might.

The tax you owe is never on the full amount of your SSDI check. At most, you pay tax on 85 percent of your benefits, and often much less. State taxes are a separate question: some states tax SSDI, and some do not.

Key Takeaways

  • You owe federal tax on SSDI only if your combined income (SSDI plus all other income) exceeds $25,000 as a single filer or $32,000 as a married couple filing jointly.
  • If you do owe tax, you pay it only on the portion of your benefits above the threshold, never on your full SSDI amount.
  • The IRS uses a two-tier formula: you may owe tax on up to 50 percent of your benefits at the first tier, or up to 85 percent at the second tier, depending on how far your income exceeds the threshold.
  • Some states do not tax SSDI at all, while others tax it the same way the federal government does — check your state's rules.
  • Social Security sends you a form called SSA-1099 each January showing your annual SSDI payments, which you use to calculate your tax.

How the IRS Calculates What You Owe

The IRS uses your combined income to decide whether you owe tax. Combined income means your SSDI benefits plus all other income you received that year: wages from work, interest from a bank account, rental income, pension payments, and so on. The IRS does not count certain things — for example, Supplemental Security Income (SSI) does not count, and neither do some other benefits — but the list is specific, and most income does count.

Once you know your combined income, the IRS applies a two-step formula. If your combined income is below $25,000 (or $32,000 if you are married filing jointly), you owe no tax on your SSDI. If it is above that, you move to the first tier: you may owe tax on up to 50 percent of your benefits. If your combined income is even higher, you move to the second tier: you may owe tax on up to 85 percent of your benefits.

The exact amount depends on how far above the threshold you go. The formula is complex enough that most people use tax software or a tax preparer to calculate it. The important thing to know is that you are never taxed on your full SSDI amount — the law caps it at 85 percent of your benefits.

When You Probably Will Not Owe Tax

If SSDI is your only income, you will not owe federal tax. The same is true if you have very little other income. For example, if you are single and receive $1,500 a month in SSDI ($18,000 a year) and have no other income, your combined income is $18,000 — well below the $25,000 threshold.

Even if you have some other income, you may still fall below the threshold. If you are single and receive $18,000 in SSDI plus $6,000 in interest from savings, your combined income is $24,000 — still below $25,000. You would owe no federal tax.

The threshold is the same whether you receive $1,000 a month in SSDI or $3,000 a month. This means people with higher SSDI payments are more likely to cross the threshold if they have other income, but the threshold itself does not change.

When You Might Owe Tax

You are most likely to owe tax if you have earned income — wages from a job — in addition to SSDI. If you are single, receive $18,000 in SSDI, and earn $10,000 from part-time work, your combined income is $28,000. You are $3,000 above the threshold, and you may owe tax on part of your benefits.

You can also cross the threshold with unearned income: interest from a savings account, dividends from investments, rental income, or a pension. If you are married and receive $20,000 in SSDI plus $15,000 in pension income, your combined income is $35,000 — $3,000 above the $32,000 threshold for married couples.

The higher your other income, the more of your SSDI benefits may be subject to tax. But again, the maximum is 85 percent of your benefits, no matter how high your other income goes.

State Taxes on SSDI

Federal tax is only part of the story. Thirteen states tax SSDI benefits, and the rules vary by state. Some states follow the federal formula exactly. Others tax SSDI more generously — meaning they tax less of it or only tax it above a higher threshold. A few states tax SSDI the same way they tax other income, with no special rules at all.

The states that currently tax SSDI are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Rules change, so if you live in one of these states, contact your state tax authority or check their website to confirm the current rules for your situation.

If you live in a state that does not tax SSDI, you owe no state tax on your benefits, even if you owe federal tax. This is one reason to check your state's rules — you may owe nothing at all.

How to Report SSDI on Your Tax Return

Each January, Social Security sends you a form called SSA-1099. This form shows the total SSDI you received in the previous year. You use this form to report your benefits on your federal tax return.

If you file a 1040 (the main federal tax form), you report your SSDI on lines 5a and 5b. Line 5a shows the total amount from your SSA-1099. Line 5b shows how much of that is taxable — this is where the IRS formula comes in. If you use tax software, it will walk you through the calculation. If you file by hand or with a tax preparer, they will do the calculation for you.

You do not send the SSA-1099 to the IRS, but you should keep it with your tax records. If you did not receive an SSA-1099 by early February, contact Social Security to request one.

What Happens If You Owe Tax

If you owe tax on your SSDI, you pay it the same way you would pay tax on any other income. You can pay when you file your return, or you can make estimated tax payments throughout the year if you expect to owe a large amount.

Some people choose to have the IRS withhold tax directly from their SSDI check each month. To do this, you fill out a form called W-4V and send it to Social Security. Social Security will then reduce your monthly SSDI payment by the amount you request, and send that amount to the IRS. This can make it easier to avoid a large tax bill when you file.

If you do not pay tax and do not owe any, there is no penalty. The IRS only penalizes you if you owe tax and do not pay it.

Frequently Asked Questions

If I work part-time and receive SSDI, do I pay tax on both?

You pay federal income tax on your wages the same way anyone does. Whether you also pay tax on your SSDI depends on your combined income — wages plus SSDI plus any other income. If the total exceeds $25,000 (single) or $32,000 (married), you may owe tax on part of your SSDI as well.

Can I avoid paying tax on SSDI by not reporting other income?

No. The IRS calculates combined income from all sources, and you are required to report all income on your tax return. Not reporting income is tax evasion and can result in penalties and interest.

Does my spouse's income count toward the threshold if we file jointly?

Yes. If you are married and file a joint return, the IRS adds your SSDI, your spouse's SSDI (if any), and all other household income together to calculate combined income. The threshold for married couples filing jointly is $32,000.

What if I receive both SSDI and SSI?

SSI does not count toward combined income for tax purposes. Only your SSDI counts. However, SSI is itself not taxable, so you would not owe tax on it anyway. Calculate your combined income using only your SSDI and other income sources.

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

If SSDI is your only income and it is below the standard filing threshold for your age and filing status, you do not have to file. However, if you have other income or if you had taxes withheld, you may want to file to get a refund.