Social Security does not automatically take taxes out of your SSDI check

Unlike a paycheck from an employer, Social Security does not withhold federal income tax from your SSDI payment before it reaches your bank account. You receive the full monthly amount. However, you may still owe federal income tax on part or all of your benefits depending on your other income, and you are responsible for paying it — either through quarterly estimated tax payments or when you file your annual tax return.

Whether you actually owe tax depends on a calculation called "combined income," which includes your SSDI benefits plus other money you earn or receive. If your combined income exceeds a certain threshold, a portion of your benefits becomes taxable. The threshold is low: $25,000 if you file as single, $32,000 if you file as married filing jointly.

State income tax is a separate question. Most states do not tax SSDI benefits at all. A few states — including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont — do tax SSDI in some circumstances, usually only if your total income is above a certain level. Check your state's tax authority website or ask a tax preparer whether your state taxes disability benefits.

Key Takeaways

  • Social Security sends you the full SSDI amount each month with no federal tax withheld, but you may owe tax when you file your return if your combined income is high enough.
  • Combined income includes your SSDI benefits plus wages, interest, pensions, and other income; if it exceeds $25,000 (single) or $32,000 (married filing jointly), some of your benefits become taxable.
  • You can request voluntary tax withholding from your SSDI payment by filing Form W-4V with Social Security, which lets you have a percentage taken out each month instead of paying a lump sum later.
  • A handful of states tax SSDI benefits under certain conditions; most do not, so check your state's rules or speak with a tax preparer about your situation.

How the combined income calculation works

The IRS uses a formula to determine whether your SSDI is taxable. Start with your adjusted gross income (wages, self-employment income, interest, dividends, pensions, and other sources), add back certain deductions, then add half of your SSDI benefits. That total is your "combined income."

If your combined income is below $25,000 (or $32,000 if married filing jointly), none of your SSDI is taxable. If it exceeds that threshold, up to 50 percent of your benefits may be taxable — and if your combined income is very high, up to 85 percent may be taxable. The exact amount depends on how far over the threshold you go.

Example: You are single and receive $1,200 per month in SSDI ($14,400 per year). You also earn $15,000 from part-time work. Your combined income is $15,000 + (half of $14,400) = $22,200. You are below the $25,000 threshold, so none of your SSDI is taxable that year. If you earned $20,000 instead, your combined income would be $20,000 + $7,200 = $27,200, which exceeds the threshold by $2,200, and some of your benefits would be taxable.

Requesting voluntary withholding to avoid a tax bill later

If you know you will owe tax on your SSDI, you can ask Social Security to withhold a percentage from your monthly payment. This works like tax withholding from a job — you pay a little each month instead of facing a large bill when you file your return.

To set up withholding, complete Form W-4V (Voluntary Withholding Request) and mail it to your local Social Security office, or bring it in person. You can also request withholding by calling Social Security at 1-800-772-1213. You choose the withholding rate: 7 percent, 10 percent, 15 percent, or 25 percent of your monthly benefit.

The withholding takes effect the month after Social Security receives your request. You can change or stop withholding at any time by submitting a new Form W-4V. Keep in mind that withholding is voluntary — Social Security will not do it unless you ask.

What happens if you do not pay the tax you owe

If you owe federal income tax on your SSDI and do not pay it by the important date (usually April 15), the IRS will charge you interest and penalties on the unpaid amount. The longer the debt sits, the more you owe.

If you cannot pay the full amount, you have options. You can file your return on time and pay what you can, then set up a payment plan with the IRS for the remainder. You can also request an extension to file your return (though this does not extend the time to pay). The IRS website (irs.gov) has tools to help you understand your options, or you can call the IRS at 1-800-829-1040.

If your income is very low, you may not be required to file a tax return at all, even if you received SSDI. The IRS publishes income thresholds each year that determine who must file. Check the IRS website or ask a tax preparer whether you are required to file based on your specific situation.

Working with a tax preparer or accountant

Tax rules around SSDI can be confusing, especially if you have multiple sources of income. A tax preparer or certified public accountant (CPA) can review your situation, calculate your combined income, determine whether you owe tax, and help you file your return correctly.

If you cannot afford a paid preparer, the IRS offers free tax preparation through the Volunteer Income Tax information (VITA) program. VITA sites are located in libraries, community centers, and nonprofit organizations across the country. You can find a site near you at irs.gov or by calling 211.

Frequently Asked Questions

Can Social Security take my SSDI to pay back taxes I owe?

Yes. The IRS can offset (reduce) your SSDI payment to collect federal income tax debt, though this is less common than offsetting other benefits. If the IRS intends to offset your SSDI, they must notify you in advance and give you a chance to request a hearing. Contact the IRS when ready if you receive notice of an offset.

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

Not necessarily. If SSDI is your only income and it is below the filing threshold for your age and filing status, you are not required to file. However, if you have other income (wages, interest, self-employment), you likely must file. The IRS website lists the current thresholds by age and filing status.

What if I receive both SSDI and SSI?

SSDI and SSI are taxed differently. SSDI may be taxable based on combined income. SSI (Supplemental Security Income) is never taxable as income to you, though it counts toward the combined income calculation for SSDI. If you receive both, a tax preparer can help you sort out what is taxable.

Can I change my withholding rate if my income changes?

Yes. You can submit a new Form W-4V at any time to change your withholding percentage, increase it, decrease it, or stop withholding altogether. Changes take effect the month after Social Security receives your request.