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

Whether you owe federal income tax on your SSDI depends on your combined income—not just what Social Security sends you. Combined income means your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. If your combined income stays below a certain threshold, you owe nothing. If it goes above that threshold, you may owe tax on up to 85 percent of your benefits.

The threshold is $25,000 if you file as single, $32,000 if you file as married filing jointly, and $0 if you are married filing separately. These thresholds have not changed since 1984, so they affect more people now than they did then. If you have little or no other income besides SSDI, you almost certainly will not owe tax.

State income tax is different. Some states tax SSDI; most do not. If you live in Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, or Vermont, your state may tax part of your benefits. Other states do not tax SSDI at all, no matter what your income is.

Key Takeaways

  • You only owe federal income tax on SSDI if your combined income (Social Security plus other earnings) exceeds $25,000 for single filers or $32,000 for married filers.
  • Combined income includes wages, self-employment income, pensions, and investment earnings, plus half of your Social Security benefits.
  • If you do owe tax, you pay it on up to 85 percent of your benefits, not the full amount.
  • Ten states tax SSDI benefits under certain conditions; the rest do not tax them at all.

How Social Security calculates whether you owe tax

Social Security uses a formula to determine the taxable portion of your benefits. Start with your adjusted gross income (the income you report on your tax return before deductions). Add any nontaxable interest you earned, such as interest from municipal bonds. Then add half of your Social Security benefits for the year. That total is your combined income.

If your combined income is below the threshold for your filing status, none of your benefits are taxable. If it is above the threshold, you calculate how much of your benefit is taxable using IRS worksheets. The maximum taxable amount is 85 percent of your benefits, even if your combined income is very high.

Example: You are single and receive $18,000 in SSDI for the year. You also have $10,000 in wages from part-time work. Half of your SSDI is $9,000. Your combined income is $10,000 plus $9,000, which equals $19,000. Since $19,000 is below $25,000, you owe no federal tax on your benefits, even though you have other income.

Another example: You are single and receive $18,000 in SSDI. You also have $20,000 in pension income. Half of your SSDI is $9,000. Your combined income is $20,000 plus $9,000, which equals $29,000. Since $29,000 exceeds $25,000 by $4,000, part of your benefits become taxable. You would use the IRS worksheet to calculate the exact amount.

What counts as income for the tax calculation

For the purpose of figuring out whether you owe tax on SSDI, income includes wages, self-employment income, pensions, annuities, investment income (interest and dividends), rental income, and capital gains. It also includes income from a job you held while receiving SSDI, even if that job caused your benefits to be reduced or stopped under the earnings test.

Income does not include Supplemental Security Income (SSI), which is a different program. It does not include food stamps, housing information, or other means-tested benefits. It does not include the standard deduction you claim on your tax return. Nontaxable interest—such as interest from bonds issued by a state or local government—does count toward combined income for SSDI tax purposes, even though it is not taxable income for federal purposes.

If you are married and file jointly, you combine your income with your spouse's income. If your spouse receives Social Security benefits, you add half of their benefits to the combined income calculation as well. This can push a couple over the threshold even if neither person individually would be taxed.

Filing taxes when you receive SSDI

Social Security sends you a Form SSA-1099 by January 31 each year showing the total benefits you received. You use this form to report your SSDI on your tax return. If you owe federal income tax, you report it like any other tax you owe—either by paying when you file or by adjusting your withholding if you have wages.

You are not required to file a federal tax return just because you receive SSDI. You only have to file if your income (including SSDI) exceeds the filing threshold for your age and filing status. For 2024, a single person under 65 must file if their gross income is $14,600 or more. A single person 65 or older must file if their gross income is $18,350 or more. These thresholds change each year.

If you have other income—wages, a pension, investment income—you may need to file even if your SSDI alone would not require it. The IRS has a tool on its website to help you determine whether you must file. You can also contact a tax professional or your local IRS office.

Paying tax on SSDI throughout the year

If you know you will owe tax on your SSDI, you can arrange to have Social Security withhold federal income tax from your benefits. You do this by filling out Form W-4V and sending it to your local Social Security office. You choose the withholding rate: 7, 10, 12, or 22 percent of your benefits.

Withholding is voluntary, but it can help you avoid owing a large amount when you file your return. If you have other income and are already having tax withheld from wages or a pension, you may not need additional withholding from SSDI. If you have no other income and expect to owe tax only because of SSDI, withholding can spread the cost across the year.

You can change your withholding at any time by submitting a new Form W-4V. If your income changes during the year—for example, you start or stop a job—you can adjust your withholding to match. Social Security will send you a new Form SSA-1099 in January showing the amount withheld.

State income tax on SSDI

Ten states tax SSDI benefits under certain conditions: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, and Vermont. The rules vary by state. Some tax SSDI only if your income exceeds a certain threshold. Some tax it only if you are below a certain age. Some offer a deduction or exemption that reduces the taxable amount.

For example, Colorado taxes SSDI only if your federal adjusted gross income exceeds $20,000 (single) or $25,000 (married). Connecticut taxes it only if you are under 60 and your income exceeds $15,000 (single) or $20,000 (married). Minnesota taxes it like federal income tax, using the same combined income calculation and thresholds.

If you live in one of these states and think you may owe state tax on your SSDI, contact your state tax authority or a tax professional. They can tell you the exact rules for your state and help you file. Many states offer free tax preparation services for people with low to moderate income.

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 important date, you have options. You can file your return on time and pay what you can, then work out a payment plan with the IRS. The IRS offers short-term payment plans (120 days or less) at no cost and long-term payment plans (more than 120 days) for a small fee.

You can also request an extension of time to file your return (not to pay), though interest and penalties will accrue on any unpaid tax. If you are having financial hardship, you can ask the IRS to temporarily delay collection while you get back on your feet. The IRS has a process for this called "currently not collectible" status.

If you think you made a mistake on a past return or did not file when you should have, you can still file now. The IRS generally allows you to go back three years to claim a refund, and there is no time limit to file if you are owed a refund. A tax professional or your local IRS office can help you sort this out.

Frequently Asked Questions

Do I have to file taxes if I only receive SSDI?

No, not unless your combined income (SSDI plus other earnings) exceeds the filing threshold for your age and filing status. For 2024, a single person under 65 must file if gross income is $14,600 or more. If you have no other income and receive only SSDI, you do not have to file.

Can I reduce the amount of SSDI tax I owe?

You cannot reduce the tax itself, but you can reduce your combined income by timing when you receive other income. For example, if you are close to the threshold, delaying a large capital gain or pension payment to the next year might keep you below it. A tax professional can help you plan this.

What if Social Security withheld too much tax from my benefits?

You will receive a refund when you file your tax return. The refund comes from the IRS, not from Social Security. Make sure to report the amount withheld (shown on your Form SSA-1099) on your return so the IRS knows to refund it.

Does working while on SSDI affect whether I owe tax?

Yes. Wages from work count as income in the combined income calculation. If your wages push your combined income over the threshold, part of your SSDI becomes taxable. However, your SSDI may also be reduced or stopped under the earnings test if you earn above a certain amount.

If I live in a state that taxes SSDI, do I pay both state and federal tax?

Possibly. You may owe federal tax, state tax, or both, depending on your income and your state's rules. Some states allow a credit or deduction for federal tax paid, which can reduce your state tax. Check with your state tax authority or a tax professional for your specific situation.