The federal government taxes some SSDI payments, but not all of them

Whether you owe federal income tax on your SSDI depends on your combined income—not just what Social Security sends you. The IRS counts SSDI differently than wages: they include half of your benefits in a calculation, then compare that to other income you have. If your total crosses a threshold, some of your SSDI becomes taxable. If you stay below the threshold, you owe nothing on SSDI, even if you have other income.

The thresholds are low and have not changed since 1984, which means more people hit them each year as wages and benefits rise. A single person with $25,000 in other income will likely owe tax on SSDI. A married couple filing jointly with $32,000 in combined income will likely owe tax on SSDI. These numbers include things like wages, pensions, interest, and rental income—anything the IRS counts as income.

You do not automatically pay this tax. The Social Security Administration does not withhold it from your checks. You have to report SSDI on your tax return yourself, calculate whether any is taxable, and pay what you owe—or claim a refund if you overpaid during the year.

Key Takeaways

  • SSDI is taxable only if your combined income (half your SSDI plus all other income) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
  • Social Security does not withhold federal income tax from SSDI payments, so you must report it yourself on your tax return.
  • If you have other income like wages, pensions, or interest, you are more likely to owe tax on your SSDI.
  • You can request voluntary withholding from your SSDI checks if you want to pay tax throughout the year instead of owing a lump sum at tax time.

How the IRS counts your income to determine if SSDI is taxable

The IRS uses a formula called combined income to decide whether your SSDI is taxable. Combined income is half your SSDI benefits plus all your other income. "Other income" includes wages, self-employment income, interest, dividends, pensions, rental income, and certain other sources. It does not include Supplemental Security Income (SSI), which is a different program.

Once you know your combined income, you compare it to a threshold. For a single person, the threshold is $25,000. For a married couple filing jointly, it is $32,000. For a married person filing separately, it is $0—meaning any combined income at all can trigger taxation. If your combined income is below the threshold, none of your SSDI is taxable. If it is above the threshold, a portion of your SSDI becomes taxable income.

The amount of SSDI that becomes taxable is not a straightforward percentage. The IRS uses a two-tier system. The first tier taxes up to 50 percent of your benefits if you are above the first threshold. The second tier taxes up to 85 percent of your benefits if you are above a higher threshold ($34,000 for single filers, $44,000 for married couples filing jointly). Most people who owe tax on SSDI fall into the first tier.

What counts as income and what does not

Income that counts toward the combined income threshold includes W-2 wages, self-employment income, interest from savings accounts and bonds, stock dividends, rental income, pension payments, and distributions from retirement accounts. It also includes income from a job you held before becoming disabled, if you still receive it. Some types of income are excluded: Supplemental Security Income (SSI) does not count, and neither do certain railroad retirement benefits or veterans' benefits in some cases.

A common source of confusion is whether you count income you earned but have not yet received. The IRS counts income based on when you receive it, not when you earn it. If you worked in December but did not get paid until January, that payment counts in the January tax year. If you receive a lump-sum back-pay award from a previous job, the entire amount counts in the year you receive it, which can push you over the threshold that year even if you would not be over in other years.

Nontaxable income—like gifts, inheritances, or returns of your own money—does not count. Neither do some government benefits like Supplemental Security Income or certain need-based programs. If you are unsure whether a specific payment counts, the IRS publication 915 lists the rules in detail, or you can ask a tax preparer.

How much of your SSDI becomes taxable

If your combined income exceeds the threshold, the IRS does not tax all of your SSDI. Instead, they tax a portion of it using a formula. For most people, up to 50 percent of benefits above the first threshold become taxable. This means if you are $5,000 over the threshold, roughly $2,500 of your SSDI becomes taxable income.

If your combined income is very high—above $34,000 for single filers or $44,000 for married couples filing jointly—a second calculation kicks in. This can tax up to 85 percent of your benefits. Very few SSDI recipients reach this level, but it is possible if you have substantial other income like a pension or rental property.

The actual dollar amount of tax you owe depends on your tax bracket. If you are in the 12 percent tax bracket and $2,500 of your SSDI is taxable, you owe roughly $300 in federal income tax on that amount. The higher your tax bracket, the more you owe on the same taxable SSDI amount.

Requesting voluntary withholding from your SSDI checks

Because Social Security does not automatically withhold federal income tax, you can end up owing a large amount when you file your tax return. To avoid this, you can ask Social Security to withhold a set amount from each SSDI check. This is called voluntary withholding, and it works the same way withholding works on a paycheck.

You request voluntary withholding by completing Form W-4V and sending it to your local Social Security office or mailing it to the address on the form. You can choose to withhold 7 percent, 10 percent, 15 percent, or 25 percent of your benefit amount each month. If you want a different percentage, you can request it, though Social Security may not honor it. You can change or stop withholding at any time by submitting a new form.

Voluntary withholding is optional. Some people use it to spread their tax bill across the year. Others prefer to pay the full amount at tax time or claim a refund if they overpaid. There is no penalty for not withholding, as long as you pay what you owe by the tax important date or file for an extension.

Reporting SSDI on your federal tax return

You report SSDI on Form 1040 (the main federal income tax form) using the worksheet in the instructions or IRS Publication 915. Social Security sends you a Form SSA-1099 in January showing how much SSDI you received in the previous year. You use this amount to fill out the worksheet and determine whether any of your SSDI is taxable.

If none of your SSDI is taxable, you still may need to file a tax return if your other income is above the filing threshold for your age and filing status. The filing threshold is separate from the SSDI taxability threshold. A single person under 65 must file if their income is $13,850 or more in 2023 (the threshold changes each year). Even if you do not owe tax, filing may get you a refund of withheld taxes or a refundable tax credit.

If you are unsure whether you need to file or how to report SSDI, the IRS offers free tax preparation through VITA (Volunteer Income Tax information) sites, which serve people with low to moderate income. You can find a VITA site near you through the IRS website. Many community organizations and senior centers also offer free tax help.

State income tax and SSDI

Thirty-seven states do not tax SSDI at all, regardless of your income. These states exclude SSDI from state income tax entirely. However, thirteen states do tax SSDI under certain conditions. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia all have rules that can make SSDI taxable at the state level. Illinois taxes SSDI only if your income is above a certain threshold.

If you live in a state that taxes SSDI, the rules are usually similar to federal rules but sometimes stricter or more generous. Some states use the same combined income threshold as the federal government. Others have their own thresholds or percentages. You will need to check your state's tax rules or ask a tax preparer familiar with your state's law.

Even if your state does not tax SSDI, you may still owe federal tax on it. The two are separate. You will file both a federal return and a state return (if your state requires it), and you may owe tax on one but not the other.

Frequently Asked Questions

If I have no other income, do I owe federal tax on SSDI?

No. If SSDI is your only income, your combined income is below the threshold, and none of your SSDI is taxable. You do not owe federal income tax on it and do not need to file a federal return unless you have other reasons to file (such as claiming a refundable tax credit).

What if I work part-time and receive SSDI?

Your wages count as income in the combined income calculation. If your wages plus half your SSDI exceed the threshold, some of your SSDI becomes taxable. You may owe federal income tax on both your wages and a portion of your SSDI. This is one of the most common situations where SSDI recipients owe tax.

Can I deduct medical expenses to lower my taxable SSDI?

No. Medical expenses are deductible only if you itemize deductions on your tax return, and even then, only the amount above 7.5 percent of your adjusted gross income is deductible. This rarely helps SSDI recipients because the threshold is high. The combined income calculation that determines SSDI taxability does not allow any deductions.

What happens if I do not report SSDI on my tax return?

The IRS will likely catch the error because Social Security reports your SSDI to them on Form SSA-1099. You may owe back taxes, penalties, and interest. If you made an honest mistake, you can file an amended return (Form 1040-X) to correct it. If you intentionally did not report it, you could face fraud penalties.

Does getting a refund mean I overpaid my taxes?

Not necessarily. A refund can come from voluntary withholding you requested, taxes withheld from other income like wages, or refundable tax credits like the Earned Income Tax Credit. You can have a refund even if you owe tax on SSDI—the refund just means you paid more in total taxes than you owed.