Kentucky does not tax Social Security Disability Insurance (SSDI) benefits at the state level

Kentucky has no state income tax on SSDI payments. This means you will not owe Kentucky state tax on your federal disability benefits, regardless of how much you receive or what other income you have. However, your SSDI may still be taxable at the federal level, and you may owe federal income tax depending on your total income for the year.

The distinction matters because it simplifies your state tax filing. You do not need to report SSDI as income to Kentucky, but you may still need to file a federal return and potentially pay federal tax on a portion of your benefits if your combined income exceeds certain thresholds.

Key Takeaways

  • Kentucky does not tax SSDI benefits at the state level, so you owe no Kentucky income tax on your disability payments.
  • Federal tax on SSDI depends on your combined income (SSDI plus other earnings, interest, and certain other sources), not on SSDI alone.
  • You may still be required to file a federal tax return even if you owe no Kentucky state tax.
  • If you receive both SSDI and Supplemental Security Income (SSI), only SSDI is exempt from Kentucky tax; SSI is never taxable at any level.

How federal taxation of SSDI works

Even though Kentucky does not tax SSDI, the federal government may. Whether you owe federal tax on your SSDI depends on your combined income, which includes your SSDI benefits plus any other income you receive—wages, self-employment income, interest, dividends, pensions, or distributions from retirement accounts.

The IRS uses a formula to determine how much of your SSDI is taxable. If your combined income is below a certain threshold, none of your SSDI is taxable. If it exceeds that threshold, up to 85 percent of your benefits may be subject to federal income tax. The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly; these amounts have not changed since 1984 and do not adjust for inflation.

To calculate your combined income, add one half of your SSDI benefits to all your other income sources. If that total exceeds the threshold for your filing status, you may owe federal tax. The Social Security Administration sends you a form SSA-1099 each January showing how much SSDI you received in the previous year, which you use to complete your federal return.

When you must file a federal tax return

You may be required to file a federal return even if you owe no Kentucky tax. The threshold for filing depends on your age, filing status, and type of income. For 2024, a single person under 65 with only SSDI income generally does not need to file unless their combined income exceeds $14,600. However, if you have any earned income (wages or self-employment), the threshold is lower.

If you are unsure whether you must file, the IRS provides an interactive tool on its website, or you can contact a local tax preparer. Filing even when not required can be beneficial: if federal tax was withheld from your SSDI or if you have other credits you are may have access to to, filing allows you to claim a refund.

Other Kentucky tax considerations for people receiving SSDI

Kentucky offers a tax credit for low-income individuals, but SSDI recipients are not specifically excluded or included in the rules—the credit depends on your total income and filing status, just as it does for anyone else. If your combined income is very low, you may be may have access to to the Earned Income Tax Credit (EITC) at the federal level if you also have wages; this credit is not affected by SSDI.

If you receive both SSDI and Supplemental Security Income (SSI), remember that only SSDI is exempt from Kentucky tax. SSI is never taxable at any level, federal or state, so it does not affect your tax calculation at all. The two programs are separate, and the tax treatment reflects that difference.

What to do if you receive SSDI and live in Kentucky

First, determine whether you must file a federal return using the IRS thresholds for your age and income. If you do file, you will not report your SSDI as income to Kentucky, but you will report it to the federal government on your Form 1040. The Social Security Administration will send you a form SSA-1099 showing your SSDI income; use this to complete your federal return.

If you have questions about whether your SSDI is taxable federally, contact the Social Security Administration at 1-800-772-1213 or visit ssa.gov. If you need help preparing your federal return, the IRS offers free tax preparation services through the Volunteer Income Tax information (VITA) program, which serves people with low to moderate income. You can find a VITA site near you at irs.gov.

Frequently Asked Questions

Do I have to pay Kentucky income tax on my SSDI?

No. Kentucky does not tax SSDI benefits at the state level. You will not owe Kentucky income tax on your disability payments, no matter how much you receive or what other income you have.

Can I owe federal tax on SSDI even if I have no other income?

No. If SSDI is your only income, none of it is taxable federally. Federal tax on SSDI only applies when your combined income (SSDI plus other earnings, interest, and certain distributions) exceeds the threshold for your filing status.

What is the difference between SSDI and SSI for tax purposes?

SSDI may be taxable federally but is never taxable in Kentucky. SSI is never taxable at any level, federal or state. If you receive both, only SSDI factors into your federal tax calculation.

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

Kentucky has no state income tax, so there is no Kentucky tax return to file. You may still need to file a federal return depending on your total income and filing status, even if you owe no Kentucky tax.

Where do I report SSDI on my federal tax return?

Report SSDI on line 5b of your Form 1040. The Social Security Administration sends you a form SSA-1099 each January showing your SSDI income for the previous year. Use this form to complete your federal return accurately.