Maryland does not tax Social Security Disability Insurance (SSDI) benefits

Maryland exempts SSDI from state income tax. This means you will not owe Maryland state tax on the SSDI payments you receive, regardless of your total income or filing status. The exemption applies to all SSDI recipients who live in Maryland, whether you are retired, disabled, or a survivor receiving benefits on a worker's record.

However, the federal government may still tax your SSDI benefits depending on your combined income. Maryland's exemption covers only state tax, not federal tax. You may also owe federal income tax on a portion of your benefits if your combined income exceeds certain thresholds, even though Maryland itself will not tax them.

This distinction matters because you could owe federal tax while owing nothing to Maryland. The two tax systems operate independently, and Maryland's decision to exempt SSDI does not change what the Internal Revenue Service (IRS) requires.

Key Takeaways

  • Maryland does not tax SSDI benefits at the state level, so you will not file Maryland state income tax on these payments.
  • Federal income tax may still explore to your SSDI benefits if your combined income is high enough, even though Maryland taxes nothing.
  • Combined income for federal tax purposes includes SSDI, wages, interest, dividends, and other sources, calculated using a specific formula.
  • You may need to file a federal return even if you owe no Maryland state tax, depending on your total income and filing status.

How Maryland's SSDI exemption works in practice

When you file your Maryland state return, you exclude SSDI from your taxable income. Maryland's Department of Revenue treats SSDI the same way it treats other Social Security retirement benefits—as income that is not subject to state tax. This is a blanket exemption; you do not have to meet income limits or file special forms to claim it.

If you work part-time or have other income sources, you will still report those to Maryland. Only the SSDI portion is removed from your state taxable income. This can lower your Maryland tax liability significantly if SSDI makes up a large share of your total income.

Maryland also exempts military pensions and certain other retirement income, but SSDI has its own separate exemption. You do not need to choose between them or explore for the exemption—it is automatic when you file.

Federal tax on SSDI still applies in Maryland

Even though Maryland taxes nothing, the IRS may tax up to 85 percent of your SSDI benefits. The federal tax rules depend on your combined income, which includes your SSDI, wages, interest, dividends, and half of any Social Security retirement benefits you receive.

If your combined income is below $25,000 (single filer) or $32,000 (married filing jointly), you owe no federal tax on your SSDI. If your combined income exceeds these thresholds, you may owe federal tax on up to 50 percent of your benefits, or up to 85 percent if your income is very high. The exact amount depends on how far above the threshold you are.

Living in Maryland does not change these federal thresholds or calculations. A Maryland resident with $35,000 in combined income faces the same federal tax on SSDI as someone in any other state.

What counts as combined income for federal tax purposes

Combined income is not the same as your total income. The IRS uses a specific formula: your adjusted gross income (AGI) plus nontaxable interest plus half of your SSDI benefits.

This means SSDI itself is part of the calculation used to determine whether you owe tax on SSDI—a circular rule that catches many people off guard. If you have $20,000 in wages and $10,000 in SSDI, your combined income is $20,000 plus $5,000 (half the SSDI) plus any nontaxable interest, which equals $25,000. At that threshold, you may begin owing federal tax on your benefits.

Other income sources that count include wages, self-employment income, rental income, capital gains, pension payments, and interest from savings accounts. Income that does not count includes Supplemental Security Income (SSI), workers' compensation, and certain veterans' benefits.

Filing requirements when you receive SSDI in Maryland

You may need to file a federal return even if you owe no Maryland state tax. The filing requirement depends on your gross income and filing status, not on whether you live in Maryland.

For 2024, a single person under 65 must file a federal return if their gross income is $14,600 or more. A single person 65 or older must file if their gross income is $18,150 or more. These thresholds change each year. Married couples have higher thresholds, and the rules differ depending on whether both spouses are 65 or older.

SSDI counts toward your gross income for this purpose. If your SSDI alone is $15,000 and you are under 65, you must file a federal return even if you have no other income and owe no tax. Filing is still required because your income exceeds the threshold.

How to report SSDI on your Maryland return

Maryland uses Form 502, the Maryland Individual Income Tax Return. On this form, you report all income sources, then subtract the SSDI exemption on the appropriate line.

You will receive a Form SSA-1099 from Social Security each January showing your SSDI payments for the previous year. This form shows the total amount you received. You report this amount on your Maryland return, then subtract it as an exemption, resulting in zero Maryland taxable income from SSDI.

If you have other income—wages, interest, rental income—you report those separately and pay Maryland tax on them. Only the SSDI line is exempted. Keep your Form SSA-1099 with your tax records in case Maryland requests verification.

When to contact a tax professional about SSDI

If your only income is SSDI, you likely do not need professional help. Maryland taxes nothing, and you may not owe federal tax either if your combined income is below the thresholds.

Contact a tax professional if you have multiple income sources—wages, self-employment income, rental property, or investment income—along with SSDI. The federal tax calculation becomes more complex, and a mistake can result in underpaying or overpaying. A professional can also advise whether filing a federal return is required in your situation.

If you are unsure whether you owe federal tax on your SSDI, the IRS provides a worksheet in Publication 915 that walks through the calculation. You can also contact the IRS directly at 1-800-829-1040, or work with a tax preparer who handles SSDI cases regularly.

Frequently Asked Questions

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

No. If SSDI is your only income, you do not meet Maryland's filing requirement. Maryland requires filing only if your income exceeds certain thresholds, and SSDI is exempt from Maryland tax. However, you may still need to file a federal return depending on your gross income and age.

Will I owe federal tax on my SSDI if I live in Maryland?

Maryland's exemption applies only to state tax. Federal tax depends on your combined income, not your state. If your combined income exceeds $25,000 (single) or $32,000 (married filing jointly), you may owe federal tax on a portion of your SSDI, regardless of living in Maryland.

What if I work part-time and receive SSDI?

You report your wages to Maryland and pay state tax on them. Your SSDI is still exempt from Maryland tax. For federal purposes, your wages count toward combined income, which may trigger federal tax on your SSDI. The more you earn, the more of your SSDI becomes taxable to the IRS.

Can I claim SSDI as a dependent on someone else's return?

No. SSDI is your own income, not income of the person supporting you. You cannot be claimed as a dependent solely because you receive SSDI. The person supporting you can claim you as a dependent only if you meet other requirements, such as living with them and having less than a certain amount of gross income.

Where do I report the Maryland SSDI exemption on my return?

On Form 502, you report your total SSDI on the income section, then subtract it on the line for Social Security or SSDI exemptions. The result is zero Maryland taxable income from SSDI. Keep your Form SSA-1099 to support the amount you report.