Most people on SSDI pay no federal income tax on their benefits

Whether you owe federal income tax on your SSDI depends on your total income for the year, not just what you receive from Social Security. If SSDI is your only income, you almost certainly owe nothing. If you have other income—from work, a pension, interest, or investments—some of your SSDI may become taxable.

The IRS uses a formula called "combined income" to decide this. Combined income includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits. If your combined income stays below a certain threshold, your SSDI is not taxed. If it goes above that threshold, up to 50 percent or 85 percent of your benefits may be subject to federal income tax.

State taxes are separate. Some states tax SSDI; most do not. You need to check your own state's rules, because federal nontaxability does not mean your state will treat it the same way.

Key Takeaways

  • If SSDI is your only income, you will not owe federal income tax on it, and you do not have to file a federal tax return.
  • If you have other income, the IRS uses "combined income"—your earnings plus half your SSDI—to determine whether any of your benefits are taxable.
  • The income thresholds that trigger taxation are $25,000 for single filers and $32,000 for married couples filing jointly; these thresholds have not changed since 1984.
  • State income tax rules for SSDI vary widely, and some states tax benefits that are not taxed federally.
  • You can ask the Social Security Administration to withhold federal income tax from your SSDI payments if you expect to owe tax.

How the IRS calculates combined income

Combined income is not the same as your total income. The IRS adds three things together: your adjusted gross income (the income you report on your tax return before deductions), any nontaxable interest you earned, and half of your SSDI benefits.

The half-benefit rule is the key. If you received $12,000 in SSDI last year, the IRS counts $6,000 of that toward your combined income, even though you did not actually receive $6,000 in extra money. This formula applies whether you are single, married filing jointly, married filing separately, or head of household.

Once you know your combined income, you compare it to the IRS thresholds. For 2024, the thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. If your combined income is at or below the threshold, none of your SSDI is taxed. If it exceeds the threshold, the excess triggers taxation on part of your benefits.

What happens when your combined income exceeds the threshold

If your combined income goes above the threshold, the IRS does not tax all of your SSDI. Instead, it taxes either 50 percent or 85 percent of your benefits, depending on how far above the threshold you are.

The first tier applies when your combined income is between the threshold and $9,000 more (for single filers) or $12,000 more (for married filing jointly). In this range, up to 50 percent of your SSDI becomes taxable income. The second tier applies when your combined income exceeds those amounts. In the second tier, up to 85 percent of your SSDI becomes taxable.

This means that even if your combined income is well above the threshold, the IRS will never tax more than 85 percent of your benefits. The remaining 15 percent stays tax-free. The actual amount taxed depends on your specific income and is calculated on IRS Form 1040 or Form 1040-SR.

Examples of when SSDI becomes taxable

A single person receiving $12,000 in annual SSDI and $15,000 in pension income has a combined income of $21,000 ($15,000 + $6,000, which is half the SSDI). This is below the $25,000 threshold, so none of the SSDI is taxed.

A single person receiving $12,000 in annual SSDI and $20,000 in pension income has a combined income of $26,000 ($20,000 + $6,000). This is $1,000 above the threshold. Up to 50 percent of the SSDI—up to $6,000—becomes taxable, but the actual amount taxed is limited by a formula. In this case, roughly $500 of the SSDI would be taxable.

A married couple filing jointly, receiving $24,000 in combined SSDI and $15,000 in pension income, has a combined income of $27,000 ($15,000 + $12,000, which is half the SSDI). This is below the $32,000 threshold, so none of the SSDI is taxed, even though they have other income.

State income tax rules for SSDI

Thirteen states tax SSDI benefits: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. The rules in each state differ. Some tax SSDI the same way the federal government does; others have their own thresholds and formulas.

The remaining states do not tax SSDI at all, regardless of your income. If you live in one of those states, you owe no state income tax on your benefits, even if you owe federal tax.

If you move to a different state, your tax situation may change. If you are unsure whether your state taxes SSDI, contact your state's department of revenue or tax commission directly, because the rules are specific to each state and change occasionally.

How to withhold taxes from your SSDI payments

If you expect to owe federal income tax on your SSDI, you can ask the Social Security Administration to withhold money from your monthly payments. This works the same way withholding works for paychecks: the SSA holds back a percentage and sends it to the IRS on your behalf.

To set up withholding, you complete Form W-4V (Voluntary Withholding Request) and submit it to your local Social Security office, by mail, or online through your my Social Security account. You can choose to have 10 percent, 15 percent, 25 percent, or 30 percent of your benefits withheld, or you can request a specific dollar amount.

Withholding does not change whether your SSDI is taxable; it just reduces the amount you owe when you file your tax return. If you withhold too much, you get a refund. If you withhold too little, you owe the difference when you file.

Filing a tax return when you receive SSDI

You are required to file a federal tax return only if your income exceeds certain thresholds set by the IRS. For 2024, a single person with only SSDI income does not have to file unless their combined income exceeds $14,600. A married couple filing jointly does not have to file unless their combined income exceeds $29,200.

However, if you have federal income tax withheld from your SSDI or if you have other income that requires a return, you should file even if you are not required to. Filing allows you to claim a refund of any tax withheld and to claim tax credits you may be may have access to to, such as the Earned Income Tax Credit or the Saver's Credit.

You report your SSDI on your tax return using the amount shown in Box 5 of your SSA-1099 form, which the Social Security Administration sends you each January. The SSA-1099 shows your total SSDI for the previous year and any federal tax withheld.

Frequently Asked Questions

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

No, not unless your combined income exceeds the IRS threshold for your filing status. For 2024, a single person with only SSDI income does not have to file unless combined income exceeds $14,600. However, if you had federal tax withheld, filing a return may get you a refund.

What counts as income for the combined income calculation?

Combined income includes your adjusted gross income (wages, self-employment income, pensions, interest, dividends, and other taxable income), nontaxable interest, and half your SSDI. It does not include Supplemental Security Income (SSI), food stamps, or housing information.

Can I reduce my SSDI taxes by earning less money?

Yes. If your combined income is close to the threshold, reducing other income—such as by working fewer hours or delaying a pension—can bring you below the threshold and eliminate SSDI taxation entirely. This is a decision to discuss with a tax professional or financial advisor.

Will my SSDI be taxed if I live outside the United States?

The same federal tax rules explore regardless of where you live. However, if you live in a country with a tax treaty with the United States, different rules may explore. Consult a tax professional familiar with expat taxation if you live abroad.

What if I disagree with the amount of tax the IRS says I owe on my SSDI?

You can file Form 1040-X (Amended U.S. Individual Income Tax Return) to correct your return if you believe an error was made. If you need help, the IRS offers free tax preparation through VITA (Volunteer Income Tax information) sites, which serve people with low to moderate income.