Whether your SSDI is taxed depends on your total income, not just your benefits

In 2023, the Social Security Administration does not automatically withhold taxes from your SSDI payments. However, you may owe federal income tax on part or all of your benefits depending on your combined income—which includes wages, interest, dividends, and half of your Social Security benefits themselves.

The IRS uses a formula called "combined income" to decide if your benefits are taxable. If your combined income exceeds a certain threshold, between 50% and 85% of your SSDI becomes subject to federal income tax. The thresholds in 2023 are $25,000 for single filers and $32,000 for married couples filing jointly.

Most people receiving SSDI alone—with no other income—pay no federal tax on their benefits. The tax applies mainly to people who also have wages, retirement income, or other earnings.

Key Takeaways

  • SSDI becomes taxable only if your combined income (including half your benefits) exceeds $25,000 as a single filer or $32,000 if married filing jointly in 2023.
  • Combined income includes wages, self-employment income, interest, dividends, and half of your Social Security or SSDI benefits.
  • If you owe tax on your benefits, you can have the IRS withhold it from your monthly payment or pay estimated taxes quarterly.
  • You report SSDI on your federal tax return using Form 1040 and Schedule 1, with the Social Security Administration sending you a Form SSA-1099 each January.

How the IRS calculates combined income

The IRS defines combined income as your adjusted gross income plus nontaxable interest plus half of your Social Security or SSDI benefits. This is not the same as your total income.

For example: if you earned $20,000 in wages and received $12,000 in SSDI, your combined income would be $20,000 plus half of $12,000 (which is $6,000), totaling $26,000. Since $26,000 exceeds the $25,000 threshold for single filers, part of your SSDI would be taxable.

The calculation is the same whether you receive SSDI, retirement benefits, or survivor benefits—the IRS treats them all as Social Security for tax purposes.

The two-tier tax formula for SSDI

Once your combined income exceeds the threshold, the IRS does not tax all your benefits at once. Instead, it uses a two-tier system that determines how much of your benefits become taxable.

If your combined income is between $25,000 and $34,000 (single filers in 2023), up to 50% of your benefits may be taxable. If your combined income exceeds $34,000, up to 85% of your benefits may be taxable. The exact amount depends on how far above the threshold you are.

This means even high-income filers rarely pay tax on more than 85% of their SSDI. The formula is complex, and the IRS worksheet in the instructions for Form 1040 walks you through it step by step.

State taxes on SSDI in 2023

Federal tax rules do not explore to state income tax. Thirteen states tax Social Security benefits, and the rules vary by state. Some states follow the federal formula; others have their own thresholds or exclude SSDI entirely.

States that tax Social Security in 2023 include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia. Illinois taxes benefits for people over 61, and Mississippi taxes benefits for people over 59½.

If you live in one of these states, contact your state tax authority or a tax professional to learn whether your SSDI is taxable under state law. Many states offer exemptions or deductions that reduce or eliminate the tax.

Withholding taxes from your SSDI payment

If you expect to owe tax on your benefits, you can ask the Social Security Administration to withhold federal income tax from your monthly SSDI payment. This works the same way as withholding from a paycheck—the money is sent to the IRS, and you report it when you file your tax return.

To set up withholding, complete Form W-4V (Voluntary Withholding Request) and submit it to your local Social Security office, by mail, or online through your my Social Security account. You can choose to withhold 7%, 10%, 15%, or 22% of your monthly benefit.

Withholding is optional. If you do not withhold, you can pay estimated taxes directly to the IRS using Form 1040-ES, usually in four quarterly payments. Many people find withholding simpler because the money comes out automatically.

Reporting SSDI on your 2023 tax return

In January 2024, the Social Security Administration sends you a Form SSA-1099 showing how much SSDI you received in 2023. You use this form to report your benefits on your federal tax return.

You report SSDI on Form 1040 (the main federal tax form) and Schedule 1 (Additional Income and Adjustments to Income). The form asks for the total benefits you received and the taxable amount, which you calculate using the IRS worksheet or tax software.

If you received benefits for only part of 2023—for example, if your SSDI started in June—the Form SSA-1099 shows only the months you received payments. Report only what appears on your form.

When you do not owe tax on SSDI

If your combined income is below the threshold for your filing status, you owe no federal tax on your SSDI, even if you must file a return for other reasons.

Many people receiving SSDI have no other income and fall well below the threshold. If your only income is SSDI, you almost certainly do not owe federal tax. However, you may still need to file a return if you have other income—such as wages or interest—that requires reporting.

If you are unsure whether you must file, the IRS provides a filing requirement worksheet on its website, or you can speak with a tax professional or call the IRS at 1-800-829-1040.

Frequently Asked Questions

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

No, not unless your combined income exceeds the filing threshold for your age and status. In 2023, the threshold for a single person under 65 is $13,850. However, filing may be worth it if you paid taxes through withholding or estimated payments, because you could receive a refund.

What if I did not withhold taxes and now owe money?

You can pay the full amount when you file your return, or if you cannot pay in full, the IRS offers payment plans. Contact the IRS or visit irs.gov to set up a plan. Paying as soon as you can reduces interest and penalties.

Can I change how much tax is withheld from my SSDI?

Yes. Submit a new Form W-4V to Social Security to increase, decrease, or stop withholding. Changes usually take effect within one or two months. You can update your form online, by mail, or in person at your local Social Security office.

Does SSDI count as income for other benefits like Medicare or Medicaid?

Yes, SSDI counts as income for Medicaid and most other means-tested programs, but the rules vary by state and program. Contact your state Medicaid office or the program directly to learn how your SSDI affects your other benefits.

What if I received SSDI but should not have?

If Social Security overpaid you, you still owe tax on the full amount you received in 2023, even if you repay it later. Report the gross amount on your tax return. If you repay the overpayment in the same year, you may be able to claim a deduction; if you repay it in a later year, you may be able to claim a credit. A tax professional can help you determine the right approach.