The short answer: it depends on your total income
You may have to pay federal income tax on part of your Social Security Disability Insurance (SSDI) benefits, but most people who receive only SSDI do not. The deciding factor is your combined income—a specific calculation that includes your SSDI, other income like wages or interest, and half of your SSDI benefits.
If your combined income stays below a certain threshold, you owe no tax on your benefits. If it goes above that threshold, you may owe tax on up to 50 percent or 85 percent of your benefits, depending on how far above the threshold you go. The thresholds are the same whether you file as single or married filing jointly, and they have not changed since 1984.
State taxes are separate. Some states do not tax SSDI at all. Others tax it the same way the federal government does. A few tax it differently. You need to check your state's rules.
Key Takeaways
- Most people receiving only SSDI pay no federal tax because their combined income falls below the threshold of $25,000 (single) or $32,000 (married filing jointly).
- Combined income includes your SSDI benefits, wages, self-employment income, interest, dividends, and half your SSDI amount—not just what you earn outside of benefits.
- If you have other income sources like a part-time job or a pension, you are more likely to owe tax on some of your SSDI.
- State tax rules for SSDI vary widely, so you must check your state's specific rules or ask a tax preparer familiar with your state.
- The Social Security Administration sends Form SSA-1099 each January showing how much SSDI you received; use this to file your taxes or give to a preparer.
How combined income is calculated
The IRS does not count your SSDI the same way it counts other income. Instead, it uses a formula called combined income, which is: your adjusted gross income, plus nontaxable interest, plus half of your SSDI benefits.
This matters because half your SSDI is included in the calculation even though you might not owe tax on it. For example, if you receive $1,500 a month in SSDI ($18,000 a year) and have no other income, your combined income is $9,000 (half of $18,000). That is well below the $25,000 threshold, so you owe no tax.
But if you also work part-time and earn $20,000 a year, your combined income becomes $29,000 ($20,000 + $9,000). Now you are above the $25,000 threshold. The amount above the threshold determines how much of your SSDI is taxable.
The two tax thresholds and how they work
The federal government uses two thresholds. If your combined income is below the first threshold, you owe no tax on your SSDI. If it is between the first and second threshold, up to 50 percent of your benefits may be taxable. If it exceeds the second threshold, up to 85 percent may be taxable.
| Filing Status | First Threshold | Second Threshold |
|---|---|---|
| Single | $25,000 | $34,000 |
| Married Filing Jointly | $32,000 | $44,000 |
| Married Filing Separately | $0 | $0 |
If you are married filing separately, the rules are harsh: you are treated as having a combined income of at least $1, which means some of your SSDI is almost always taxable. Most tax preparers recommend married couples file jointly to avoid this.
The math for the 50 percent bracket: take the amount your combined income exceeds the first threshold, multiply by 50 percent, and cap it at 50 percent of your total SSDI. For the 85 percent bracket, the calculation is more complex, but the IRS worksheet on Form 1040 or your tax software walks you through it.
When you are most likely to owe tax
You are most likely to owe tax on SSDI if you have income from sources other than the benefits themselves. This includes wages from work, self-employment income, interest, dividends, rental income, pensions, or distributions from retirement accounts.
Part-time work is the most common reason SSDI recipients end up owing tax. If you work and earn even a modest amount, your combined income can cross the first threshold. Pensions and retirement account withdrawals also push people over the threshold, especially if you are receiving both SSDI and a pension from a previous job.
If you receive only SSDI and have no other income, you almost certainly will not owe federal tax. The thresholds are high enough that only recipients with additional income sources typically cross them.
How to report SSDI on your tax return
The Social Security Administration sends you Form SSA-1099 each January. This form shows how much SSDI you received in the previous year. You use this amount when you file your federal tax return.
If you file your own taxes using software like TurboTax or TaxAct, you enter the SSA-1099 amount when prompted. The software calculates your combined income and determines whether any of your SSDI is taxable. If you work with a tax preparer, give them the SSA-1099 along with documentation of any other income you received.
You report the taxable portion of your SSDI on line 5b of Form 1040 (the main federal tax form). If none of your SSDI is taxable, you still report the full amount on line 5a, but line 5b will be zero.
State taxes on SSDI
Thirteen states do not tax SSDI at all, regardless of your income: Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, North Carolina, Ohio, Oklahoma, and Pennsylvania. If you live in one of these states, you owe no state tax on your SSDI.
Most other states follow the federal rule: if you owe federal tax on your SSDI, you likely owe state tax on the same amount. A few states have their own rules. For example, Missouri taxes SSDI only if your total income exceeds a certain threshold, which differs from the federal thresholds. New York exempts SSDI from state tax for most recipients.
Because state rules vary, ask your tax preparer about your specific state, or contact your state's department of revenue directly. The Social Security Administration's website has a state-by-state breakdown, though you should verify the current rules with your state.
What to do if you think you owe tax but cannot pay
If you calculate that you owe tax on your SSDI but do not have the money to pay, you still must file your return on time. Filing late carries penalties even if you cannot pay the full amount.
When you file, you can request a payment plan with the IRS. You can pay in installments over time, and the IRS will work with you on the amount. You can also request an extension to file (though this does not extend the time to pay), or ask about an offer in compromise if your financial situation is severe.
Contact the IRS at 1-800-829-1040 or visit irs.gov to learn about payment options. A tax preparer or a volunteer tax clinic (often free through VITA—Volunteer Income Tax information) can help you understand your options.
Frequently Asked Questions
Do I have to file taxes if I only receive SSDI?
Not necessarily. If your only income is SSDI and your combined income is below $25,000 (single) or $32,000 (married filing jointly), you have no federal tax filing requirement. However, if you have any other income, you may need to file even if you owe no tax on the SSDI itself.
Can I reduce my taxes by earning less money?
Yes, but only if you are close to a threshold. If your combined income is just above $25,000, earning a little less could drop you below the threshold and eliminate tax on your SSDI. However, the tax savings are usually smaller than the income you would lose, so this is rarely a practical strategy.
What if I made a mistake on a previous year's tax return involving SSDI?
You can file an amended return using Form 1040-X for any of the past three years. If you owe additional tax, you will owe interest and possibly penalties. If the IRS owes you a refund, file the amended return as soon as possible to claim it.
Does working part-time while on SSDI affect my benefits amount?
No. Your SSDI payment amount does not change based on how much you earn. However, if you earn above a certain threshold (called substantial gainful activity), Social Security may determine you are no longer disabled and stop your benefits. This is separate from the tax question. Report all work to Social Security.
Who can help me figure out if I owe tax on SSDI?
A tax preparer, a CPA, or an enrolled agent can calculate your tax liability. Many communities offer free tax help through VITA sites, which serve people with low to moderate income. You can find a VITA site at irs.gov or by calling 211.