How Taxes Work on Social Security Disability Income

You may owe federal income tax on SSDI, depending on your total income and filing status

Social Security Disability Insurance (SSDI) is not automatically tax-free. The IRS taxes a portion of your SSDI benefit if your combined income exceeds a threshold that depends on whether you file as single or married. Combined income includes your SSDI, wages, interest, dividends, and certain other sources—not just earnings from work.

The tax applies only to the portion of your benefit that exceeds the threshold. You will not owe tax on your entire SSDI check; instead, the IRS calculates how much of it is taxable based on a formula. For most people receiving SSDI alone with no other income, no tax is owed. The tax burden rises when you have wages, pensions, investment income, or other benefits in addition to SSDI.

State income tax is a separate question. Most states do not tax SSDI at all, but a few do. You should check your state's rules or speak with a tax preparer familiar with your state's law.

Key Takeaways

SSDI becomes taxable only when your combined income (SSDI plus wages, pensions, interest, and other sources) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
The tax applies to a portion of your SSDI benefit, not the whole amount, and is calculated using a formula the IRS publishes each year.
If you work while on SSDI and earn wages, you may owe tax on both the wages and a portion of your SSDI benefit.
Most states do not tax SSDI, but you should verify your state's rules or ask a tax preparer.
You can request that the Social Security Administration withhold federal income tax from your SSDI payments to avoid a large bill at tax time.

How the IRS calculates taxable SSDI

The IRS uses a two-tier formula to determine how much of your SSDI is taxable. The first tier applies if your combined income is between the base threshold and a higher threshold; the second tier applies if your combined income exceeds the higher threshold. The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These thresholds have not changed since 1984 and do not adjust for inflation.

Combined income for this calculation includes one-half of your SSDI benefit plus all other income sources. For example, if you receive $1,200 per month in SSDI ($14,400 per year) and earn $15,000 in wages, your combined income is $22,200 (half of $14,400 plus $15,000). In this case, you would not exceed the $25,000 threshold, so no SSDI would be taxable.

If your combined income exceeds the first threshold, up to 50 percent of your SSDI may be taxable. If your combined income exceeds the second threshold ($34,000 for single filers, $44,000 for married couples filing jointly), up to 85 percent of your SSDI may be taxable. The exact percentage depends on how far above the threshold your income reaches. The IRS Publication 915 contains the full worksheet and examples.

SSDI and work incentive programs

If you are working while receiving SSDI, you may be using a work incentive program such as Impairment Related Work Expenses (IRWE) or Plans to Achieve Self-Support (PASS). These programs allow you to exclude certain costs or income from the calculation of your SSDI benefit, which can help you keep your benefit while you work.

However, excluding income from your SSDI calculation does not exclude it from your tax calculation. The IRS still counts all your wages and other income when determining whether your SSDI is taxable. A work incentive program may lower your SSDI benefit but not your tax liability. You should plan for both the benefit reduction and the tax impact when you start working.

Withholding taxes from your SSDI payments

You can ask the Social Security Administration to withhold federal income tax from your SSDI payments each month. This is optional, but it can help you avoid owing a large amount at tax time. To request withholding, you fill out Form W-4V (Voluntary Withholding Request) and send it to your local Social Security office or mail it to the address on the form.

You can choose to withhold 7, 10, 15, or 22 percent of your SSDI payment. The amount you choose should depend on your total tax liability for the year. If you are unsure what percentage to choose, a tax preparer or the IRS can help you estimate. You can change your withholding request at any time by submitting a new Form W-4V.

Withholding is not the same as paying your full tax bill. It straightforward reduces the amount you owe when you file your return. If you have other income sources or deductions, your actual tax liability may be higher or lower than the amount withheld.

Reporting SSDI on your tax return

The Social Security Administration sends you a Form SSA-1099 each January showing the total SSDI you received in the previous year. You use this form to report your SSDI on your federal tax return. The form shows the gross amount of SSDI you received, not the taxable amount—the IRS calculates the taxable portion based on your other income.

If you file Form 1040 or Form 1040-SR, you report your SSDI on the "Benefits received from Social Security" line. You then use the IRS worksheet in Publication 915 to calculate how much of your benefit is taxable and enter that amount on the appropriate line of your return. If your only income is SSDI and it is below the threshold, you may not need to file a return at all, but you should verify this with a tax preparer or the IRS.

If you received SSDI for only part of the year—for example, if you returned to work and your benefits were suspended—the Form SSA-1099 will show only the amount you actually received. You report that amount on your return.

State income tax and SSDI

Most states do not tax SSDI benefits at all. However, a small number of states treat SSDI the same way they treat other income and may tax it if your total income exceeds their state threshold. The states that may tax SSDI are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. Even in these states, the tax applies only if your income exceeds the state's threshold, and some states offer exemptions or deductions for disability income.

You should check your state's tax rules or contact your state tax authority to learn whether SSDI is taxable in your state. A tax preparer in your state can also advise you. If you move to a different state during the year, you may owe tax to both states, depending on when you moved and how each state treats part-year residents.

What to do if you cannot pay the tax you owe

If you owe federal income tax on your SSDI and cannot pay the full amount by the filing important date, you have options. You can request a payment plan from the IRS, which allows you to pay in installments over time. You can also request an offer in compromise, which is a settlement for less than the full amount owed, though this is rarely approved. You should file your return on time even if you cannot pay, because the penalty for not filing is larger than the penalty for not paying.

If you are having financial hardship, you can contact the IRS to discuss your situation. The IRS has programs for people with low income and may be able to temporarily delay collection or reduce penalties. You can also seek help from a low-income tax clinic, which offers free tax preparation and representation to people who meet income limits.

Frequently Asked Questions

If I receive only SSDI and no other income, do I have to pay taxes?

No, not unless your SSDI exceeds the threshold of $25,000 (single) or $32,000 (married filing jointly). Since these thresholds are based on combined income and you have no other income, you would need to receive more than $25,000 or $32,000 in SSDI alone to owe tax. Most people on SSDI receive less than this amount per year.

If I work part-time and receive SSDI, will I owe taxes on both?

You will owe tax on your wages regardless of SSDI. You may also owe tax on a portion of your SSDI if your combined income (half your SSDI plus all wages and other income) exceeds the threshold. A tax preparer can calculate your exact liability based on your wages and SSDI amount.

Can I reduce my SSDI tax by using a work incentive program?

Work incentive programs like IRWE and PASS can reduce your SSDI benefit, which lowers your combined income for tax purposes. However, they do not reduce your tax on wages or other income. The IRS still counts all your earnings when calculating whether your SSDI is taxable.

What if I disagree with the amount of SSDI shown on my Form SSA-1099?

Contact the Social Security Administration directly to report the error. You can call 1-800-772-1213 or visit your local Social Security office. Do not file your tax return until the Form SSA-1099 is corrected, because the IRS will match your return against the form.

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

Only if your combined income exceeds the threshold or if you have tax withheld from your SSDI and want to claim a refund. If you have no other income and no withholding, you may not be required to file. However, filing may allow you to claim the Earned Income Tax Credit or other refundable credits if you also have wages.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.