The basic rule: your income and filing status determine it
Whether you owe federal income tax on your SSDI depends on your total income for the year, not just what you received from Social Security. The IRS uses a formula called "combined income" that includes your SSDI, other earnings, and certain non-taxable income added together. If your combined income falls below a certain threshold, you owe no tax on your benefits. If it goes above that threshold, a portion of your SSDI becomes taxable.
The threshold is different depending on whether you file as single, married filing jointly, or married filing separately. These thresholds have not changed since 1984, so they stay the same year to year.
Key Takeaways
- Combined income is the sum of your SSDI, wages, self-employment income, interest, dividends, and half of your total Social Security benefits for the year.
- If you are single and your combined income is under $25,000, you pay no tax on your SSDI; between $25,000 and $34,000, up to 50 percent may be taxable; above $34,000, up to 85 percent may be taxable.
- If you are married filing jointly and your combined income is under $32,000, you pay no tax; between $32,000 and $44,000, up to 50 percent may be taxable; above $44,000, up to 85 percent may be taxable.
- You can request a Social Security Benefit Statement from the SSA each year to confirm the exact amount you received, which you need to calculate combined income correctly.
- If you think you will owe tax, you can ask Social Security to withhold federal income tax from your monthly benefit payment to avoid a large bill at tax time.
How to calculate your combined income
Start by adding up all the money you received during the tax year. Include your W-2 wages, self-employment income, interest from bank accounts, dividends from investments, rental income, and any other taxable income. Then add half of your total Social Security benefits (SSDI and any retirement benefits combined) to that number. The result is your combined income.
For example: if you earned $15,000 in wages, received $18,000 in SSDI, and had $500 in interest income, your combined income would be $15,000 + $500 + (half of $18,000) = $24,000.
You will need your Social Security Benefit Statement to know the exact amount you received. You can view this statement online at ssa.gov by creating a my Social Security account, or you can call Social Security at 1-800-772-1213 to request a paper statement.
The tax brackets for single filers
If you file as single, the IRS applies three tiers to your combined income:
| Combined Income Range | Tax on SSDI |
|---|---|
| Under $25,000 | $0 |
| $25,000 to $34,000 | Up to 50% of benefits |
| Over $34,000 | Up to 85% of benefits |
The actual amount you owe in the higher brackets is calculated using a formula, not a flat percentage. If your combined income is $26,000, you do not automatically owe tax on 50 percent of your benefits. Instead, the IRS calculates the taxable portion based on how far above the first threshold you are. The formula ensures that the amount taxed increases gradually as your income rises.
The tax brackets for married filers
If you are married and file jointly with your spouse, the thresholds are higher:
| Combined Income Range | Tax on SSDI |
|---|---|
| Under $32,000 | $0 |
| $32,000 to $44,000 | Up to 50% of benefits |
| Over $44,000 | Up to 85% of benefits |
If you are married but file separately, the rules are much stricter. If you lived with your spouse at any time during the year and file separately, you will owe tax on up to 85 percent of your benefits, regardless of your income level. For this reason, married couples almost always file jointly.
What counts as income for this calculation
Combined income includes more than just wages. The IRS counts interest from savings accounts, dividends from stocks or mutual funds, capital gains from selling investments, rental income, and income from self-employment. It also includes taxable pensions and distributions from retirement accounts like IRAs or 401(k)s.
Some types of income do not count toward combined income. These include Supplemental Security Income (SSI), Temporary information for Needy Families (TANF), food stamps, housing information, and most state and local tax refunds. Veterans' benefits and workers' compensation also do not count. However, non-taxable interest (such as interest from municipal bonds) is added back in for this calculation only — it does not count as taxable income on your return, but it does count toward the threshold that determines whether your SSDI is taxable.
How to handle taxes if you expect to owe
If you calculate that your combined income will put you above the first threshold, you have options. You can set aside money throughout the year to pay the tax bill when you file, or you can ask Social Security to withhold federal income tax from your monthly SSDI payment.
To request withholding, fill out Form W-4V (Voluntary Withholding Request) and send it to your local Social Security office or mail it to Social Security. You can choose to have 7, 10, 15, or 25 percent of your monthly benefit withheld. This reduces your monthly payment but means you will not owe a large amount at tax time. You can change or cancel your withholding request at any time.
If you do not withhold and owe tax, you will report the taxable portion of your SSDI on your federal income tax return using Form 1040 and Schedule 1. The IRS provides a worksheet to calculate the exact taxable amount. Many tax preparation services and tax software programs can walk you through this calculation.
Frequently Asked Questions
Do I have to file a tax return if I only receive SSDI?
Not necessarily. If SSDI is your only income and it is below the standard deduction for your filing status, you do not have to file. However, if you have other income (wages, interest, dividends), you may need to file even if your SSDI is not taxable. Check the IRS website or use their interactive tool to determine whether you must file.
What if I have a spouse who works but I only receive SSDI?
Your spouse's income counts toward your combined income if you file jointly. If your spouse earned $40,000 and you received $20,000 in SSDI with no other income, your combined income would be $40,000 + $500 (half your SSDI) = $40,500. This puts you in the taxable range even though you did not earn the money yourself.
Can I reduce my combined income to avoid taxes on my SSDI?
Not by choice. You cannot exclude earned income or investment income from the combined income calculation. However, if you have a choice about when to take distributions from retirement accounts or when to sell investments, timing those transactions in different years might help. Consult a tax professional about your specific situation.
Does state income tax work the same way as federal tax?
No. Most states do not tax SSDI at all, even if your federal benefits are taxable. A few states (Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont) tax SSDI under certain conditions, but their rules differ from the federal formula. Check your state's tax agency website to learn whether your state taxes SSDI.
What if I received SSDI for only part of the year?
You count only the SSDI you actually received. If you started receiving benefits in June, you include only the six months of payments in your combined income calculation. Your Social Security Benefit Statement will show the exact amount for the year.