Pennsylvania does not tax SSDI, SSI, or other disability benefits on your state return

Pennsylvania has no state income tax on Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), or railroad retirement disability benefits. This is true whether you receive benefits as a disabled worker, a disabled adult child, or a surviving spouse. You do not report these payments to the Pennsylvania Department of Revenue, and they do not reduce your Pennsylvania tax liability.

This rule applies regardless of how much disability income you receive or what other income you have. If you live in Pennsylvania and file a state return, you exclude all disability benefits from your Pennsylvania taxable income. The only exception is if you have earned income from work while receiving benefits — that work income is taxable in Pennsylvania, but the benefits themselves are not.

Key Takeaways

  • Pennsylvania does not tax SSDI, SSI, or railroad retirement disability benefits on your state return.
  • You do not report disability benefits to the Pennsylvania Department of Revenue, even if you have other income.
  • If you work while receiving disability benefits, your wages are taxable in Pennsylvania, but your benefits are not.
  • Federal tax treatment of SSDI and SSI differs from Pennsylvania's — you may owe federal tax on SSDI even though Pennsylvania taxes nothing.

Why Pennsylvania excludes disability benefits from state income tax

Pennsylvania's tax code treats disability benefits as non-taxable income under state law. This is a policy choice by the state legislature, separate from federal tax law. Many states make this choice; others tax disability benefits the same way they tax other income. Pennsylvania's approach means that disability recipients do not pay state income tax on the money they receive from Social Security or SSI.

This exclusion applies to the full amount of your benefit payment. If you receive $1,500 per month in SSDI, none of that $1,500 is subject to Pennsylvania income tax. The same holds for SSI payments, which are also excluded entirely. This is different from the federal treatment of SSDI, where a portion of your benefits may be taxable depending on your combined income.

How to report disability income on your Pennsylvania return

You do not report SSDI or SSI on your Pennsylvania tax return. If you file Form PA-40 (Pennsylvania's resident income tax return), you straightforward do not include disability benefits in your income calculation. You will not see a line item for disability benefits on the form because Pennsylvania does not tax them.

If you received a Form SSA-1099-B (for SSDI) or Form SSA-1099-SSI (for SSI) from Social Security, keep it for your records. You will need it if you file a federal return, because the IRS requires you to report it there. But you do not need to attach it to your Pennsylvania return or reference it anywhere on your state forms.

If you have other income — wages, self-employment income, interest, or dividends — you report those on your Pennsylvania return as usual. Only the non-disability income is taxable in Pennsylvania.

The difference between Pennsylvania and federal tax treatment

Pennsylvania's rule is simpler than the federal rule. At the federal level, SSDI may be partially taxable if your combined income exceeds certain thresholds. Combined income includes your adjusted gross income, non-taxable interest, and half of your SSDI benefits. If that total exceeds $25,000 (single filer) or $32,000 (married filing jointly), up to 85% of your SSDI may be taxable federally.

SSI is never taxable federally, but SSDI can be. Pennsylvania, by contrast, taxes neither. This means you could owe federal tax on SSDI while owing nothing to Pennsylvania. You must file both a federal return (Form 1040) and a Pennsylvania return (Form PA-40) if you have income that triggers a filing requirement in either state.

If you are unsure whether you must file a federal return, use the IRS's interactive tax assistant or consult a tax professional. Pennsylvania's filing requirement is separate and depends on your Pennsylvania income alone.

What counts as disability income in Pennsylvania

Pennsylvania excludes these payments from state income tax: SSDI (Social Security Disability Insurance), SSI (Supplemental Security Income), and railroad retirement disability benefits paid under the Railroad Retirement Act. These are the three main federal disability programs.

Other disability payments may have different treatment. If you receive workers' compensation for a work injury, that is not taxable in Pennsylvania. If you receive disability benefits from a private insurance policy (such as long-term disability from an employer), those may be taxable in Pennsylvania depending on whether you or your employer paid the premiums. If you receive Veterans Administration disability compensation, that is not taxable in Pennsylvania. Always check the source of the payment and the type of benefit to be certain.

If you work while receiving disability benefits

If you return to work while receiving SSDI, your wages are taxable in Pennsylvania. Social Security has work incentive programs that allow you to earn money and continue receiving benefits for a time, but Pennsylvania taxes your earnings just as it would for any other worker. Your disability benefit itself remains non-taxable; only your wages are subject to Pennsylvania income tax.

The same applies if you receive SSI and work. Your work income is taxable in Pennsylvania, but your SSI benefit is not. Keep records of your work earnings and report them on your Pennsylvania return if your total income exceeds the filing threshold.

Frequently Asked Questions

Do I have to file a Pennsylvania tax return if I only receive disability benefits?

No. Pennsylvania requires you to file only if your income exceeds the filing threshold for your filing status. Since disability benefits are not taxable in Pennsylvania, they do not count toward that threshold. If your only income is SSDI or SSI, you do not have to file a Pennsylvania return.

I received a 1099-B from Social Security. Do I send it to Pennsylvania?

No. The 1099-B is for federal tax purposes only. You do not attach it to your Pennsylvania return or report the amount to the Pennsylvania Department of Revenue. Keep it with your federal tax records.

What if I live in Pennsylvania but work in another state?

You still file a Pennsylvania return if you are a resident, and disability benefits remain non-taxable in Pennsylvania regardless of where you work. Your wages are taxable in Pennsylvania (and possibly in the other state as well, depending on that state's rules). Consult a tax professional if you work across state lines.

Are my disability benefits taxable if I move out of Pennsylvania?

No. SSDI and SSI are not taxable to Pennsylvania residents because of Pennsylvania state law, but they are also not taxable in most other states. However, a few states do tax disability benefits, so check the rules of your new state if you move.

Can I deduct medical expenses related to my disability on my Pennsylvania return?

Pennsylvania does not allow a state income tax deduction for medical expenses. You may be able to deduct them on your federal return if you itemize deductions and your total medical expenses exceed a certain percentage of your adjusted gross income, but Pennsylvania offers no equivalent deduction.