SSDI recipients can get tax refunds, but only if they paid taxes in the first place

If you receive SSDI, you may owe federal income tax on part of your benefits — but that does not automatically mean you get a refund. A refund happens only when you have paid more tax than you owe. Since many SSDI recipients have little or no other income, they often do not pay taxes at all, which means there is nothing to refund.

Whether you can get a refund depends on three things: whether your SSDI benefits are taxable, whether you had other income that triggered tax withholding, and whether you filed a tax return. The Social Security Administration does not automatically withhold federal income tax from SSDI payments the way an employer does from a paycheck. That means you have to plan ahead or file a return to settle what you owe.

Key Takeaways

  • SSDI benefits themselves do not have federal income tax withheld, so you will not see a refund unless you had other income that was taxed.
  • If part of your SSDI is taxable and you had wages, interest, or other income with tax withheld, you may be owed a refund.
  • You must file a federal tax return to claim a refund, even if you normally would not have to file.
  • The IRS uses a worksheet to determine how much of your SSDI is taxable, and this amount varies based on your total income and filing status.

When SSDI benefits count as taxable income

Not all of your SSDI is taxable. The IRS uses a formula that depends on your combined income — a calculation that includes half of your SSDI benefits plus all your other income (wages, interest, pensions, and so on).

If your combined income exceeds a threshold that depends on your filing status, part of your SSDI becomes taxable. For someone filing as single, the first threshold is $25,000. For married filing jointly, it is $32,000. These thresholds have not changed since 1984, so they affect more people now than they did when they were set.

The taxable portion is never more than 85 percent of your benefits, and it is calculated using a specific IRS worksheet. Because the math is complex and depends on your exact income mix, many SSDI recipients find it easier to work with a tax preparer or use free tax software that handles the calculation.

How to get a refund if you are owed one

To receive a refund, you must file a federal tax return. The IRS will not send you money without one, even if your employer or bank withheld taxes from other income you received.

If you had wages from part-time work, a pension, or interest income, and tax was withheld from those sources, you may have overpaid your total tax liability once your SSDI is factored in. Filing a return lets you claim that overpayment back as a refund.

You can file a paper return by mail or file electronically using tax software. Many communities offer free tax preparation through the IRS Volunteer Income Tax information (VITA) program, which is open to people with low to moderate income. You can find a VITA site near you through the IRS website.

What happens if you do not file a return

If you do not file a tax return, you do not get a refund, even if you are owed one. The IRS does not automatically calculate what you are owed or send it to you. You have to claim it yourself by filing.

You have up to three years to file a return and claim a refund. If you wait longer than that, the refund is forfeited to the U.S. Treasury. So if you think you may be owed money, filing even a year or two late is still worth doing.

Some SSDI recipients assume they do not have to file because their only income is SSDI. That is often true — if SSDI is your only income and none of it is taxable, you have no filing requirement. But if any of your SSDI is taxable, or if you had other income, you should file to see whether you are owed a refund.

SSDI and the Earned Income Tax Credit

If you had wages from work while receiving SSDI, you may also be owed the Earned Income Tax Credit (EITC). This is a refundable credit, which means you can receive money from it even if you owe no tax.

EITC is designed for people with low to moderate earned income. The amount depends on how much you earned, your filing status, and whether you have dependents. Because SSDI itself does not count as earned income, the credit is based only on wages or self-employment income.

If you worked part-time or had a seasonal job while on SSDI, filing a return could result in a refund from EITC alone, separate from any overpayment of regular income tax. A tax preparer or free tax software can calculate whether you may have access to.

Reporting SSDI on your tax return

When you file, you will report your SSDI benefits on your return. The Social Security Administration sends you a Form SSA-1099-Soc Sec each January showing the total benefits you received in the previous year. Use this form to fill in the SSDI amount on your tax return.

You do not need to attach the SSA-1099 to your return, but keep it with your records. If you file electronically, the software will guide you through entering the amount. If you file by paper, you will enter it on the appropriate line of your form.

The IRS worksheet for calculating taxable SSDI is included in the tax form instructions. If you use tax software or a preparer, this calculation is done for you automatically.

Planning ahead to avoid surprises

Because SSDI is not automatically taxed, many recipients are surprised to learn they owe money when they file. You can avoid this by estimating your tax liability early in the year and setting money aside, or by requesting that Social Security withhold federal income tax from your benefits.

To request withholding, you file Form W-4V with the Social Security Administration. You can choose to have 7, 10, 15, or 25 percent of your monthly SSDI payment withheld for federal income tax. This works the same way as payroll withholding — the money is held and applied to your tax bill when you file.

Requesting withholding does not may provide you will not owe tax or that you will get a refund. It straightforward spreads the tax payment across the year instead of settling it all at once when you file. Many people find this easier to manage.

Frequently Asked Questions

If I get a refund, will it affect my SSDI benefits?

No. A tax refund is not counted as income for SSDI purposes. You can receive a refund without it changing your benefit amount or causing any other problem with your case.

Do I have to file a tax return if SSDI is my only income?

Only if part of your SSDI is taxable based on your combined income. If none of it is taxable, you have no filing requirement. But if you are unsure, filing does not hurt and may result in a refund you are owed.

Can I file my taxes online for free?

Yes. The IRS Free File program offers free tax software to people with income below a certain level, which includes many SSDI recipients. You can also use VITA sites in your community for free in-person help.

What if I did not get a Form SSA-1099 in the mail?

Contact Social Security at 1-800-772-1213 or visit your local Social Security office. You can also create an account on ssa.gov to view and print your SSA-1099 online. You need this form to file your return accurately.

If I owe taxes, can Social Security take it from my SSDI?

The IRS can offset a federal tax debt against your SSDI benefits, but only under specific circumstances and with notice. This is rare. If you owe taxes, contact the IRS or a tax professional to discuss payment options before the debt reaches that stage.