Michigan does not tax SSDI benefits at the state level

Michigan has no state income tax on Social Security Disability Insurance (SSDI) benefits. This is true regardless of how much you receive, your age, or your other income. If you live in Michigan and receive SSDI, you will not owe Michigan state income tax on those payments.

However, you may still owe federal income tax on SSDI depending on your total income from all sources. The federal tax treatment of SSDI is separate from Michigan's rules and depends on whether you have other income—wages, pensions, interest, or other benefits. Michigan's decision not to tax SSDI does not change what you owe to the federal government.

This protection applies only to SSDI. If you receive Supplemental Security Income (SSI), a different federal program, Michigan also does not tax that. But SSI and SSDI are different programs with different rules, and the tax treatment varies by state.

Key Takeaways

  • Michigan does not tax SSDI income at the state level, so you will owe no Michigan state income tax on your SSDI payments.
  • Federal income tax on SSDI is determined by your total income from all sources, not by Michigan law, and may still explore to you.
  • You must file a federal tax return if your combined income (SSDI plus other income) exceeds the threshold set by the IRS for your filing status.
  • If you work while receiving SSDI, your wages are taxable in Michigan and to the federal government, even though SSDI itself is not.

How federal tax on SSDI works

The federal government taxes SSDI based on your combined income—not SSDI alone. Combined income means your SSDI payment plus half of your SSDI plus any other income you have (wages, pensions, interest, rental income, and so on). If your combined income is above a certain threshold, a portion of your SSDI becomes taxable at the federal level.

The threshold depends on your filing status. For a single filer, the threshold is $25,000. For married filing jointly, it is $32,000. For married filing separately, it is $0—meaning any combined income at all may trigger taxation. These thresholds have not changed since 1984 and do not adjust for inflation.

If you are below the threshold, none of your SSDI is taxable. If you are above it, up to 50 percent of your SSDI becomes taxable, or in some cases up to 85 percent. The exact amount depends on how far above the threshold you are. The IRS worksheet for this calculation is complex, and many people find it easier to work with a tax preparer or use tax software that handles SSDI.

When you must file a federal tax return

You must file a federal tax return if your gross income exceeds the standard deduction for your filing status. For 2024, the standard deduction for a single filer under age 65 is $14,600. For a single filer age 65 or older, it is $18,150. These amounts increase each year.

SSDI counts toward this threshold. If you receive $15,000 in SSDI and have no other income, you exceed the standard deduction and must file. If you also have wages or other income, the requirement to file comes sooner. Even if you do not owe tax, filing may be required if you have self-employment income of $400 or more.

Filing is also worthwhile even when not required, because you may be due a refund. If federal tax was withheld from other income (such as wages), you may get money back by filing.

SSDI and Michigan earned income tax credit

Michigan does not have a state earned income tax credit. Some states offer their own version of the federal Earned Income Tax Credit (EITC), which reduces or eliminates tax for low-income workers. Michigan does not. This means you cannot claim a Michigan state credit based on SSDI or wages.

You may still be able to claim the federal EITC if you have earned income (wages from work). SSDI itself does not count as earned income for the EITC, but if you work part-time while receiving SSDI, your wages do. The federal EITC can be substantial—up to several thousand dollars depending on your income and family size—so it is worth checking whether you may have access to.

What to do if you work while receiving SSDI

If you work and receive SSDI, your wages are fully taxable in Michigan (if Michigan had an income tax, which it does not) and to the federal government. SSDI itself remains untaxed in Michigan. Your combined income for federal tax purposes includes both your wages and your SSDI, which may push you over the threshold and make some of your SSDI taxable federally.

SSDI has work incentives that allow you to earn money without losing your entire benefit. The Trial Work Period lets you earn any amount for nine months without affecting your SSDI payment. After that, your benefit is reduced if your earnings exceed a monthly threshold (called Substantial Gainful Activity, or SGA). The exact rules are complex, and it is worth speaking with a benefits planner before taking a job.

Keep records of your wages and any other income. You will need these when filing your federal tax return, and the IRS may ask for proof.

Reporting SSDI on your federal tax return

SSDI appears on a Form SSA-1099, which Social Security sends you by January 31 each year. This form shows the total SSDI you received in the previous year. You use this form to fill out your federal tax return.

On the federal Form 1040, SSDI goes on line 5b (for single filers and most others). You also complete a worksheet to determine how much, if any, of your SSDI is taxable. Tax software and tax preparers can do this for you. If you file by paper, the IRS provides the worksheet in the Form 1040 instructions.

If you did not receive a Form SSA-1099 by early February, contact Social Security to request one. Do not estimate your SSDI amount; use the official form.

Frequently Asked Questions

Do I have to file a Michigan state tax return?

No. Michigan has no state income tax, so there is no Michigan state tax return to file. You only file a federal return if your income exceeds the federal threshold. You may also need to file if you owe other taxes (such as self-employment tax) or if you want to claim a federal refund.

Will my SSDI affect my may be able to access for other Michigan benefits?

SSDI does not count as income for most Michigan state benefits, including food information (SNAP) and Medicaid. However, the rules vary by program and change periodically. Contact the Michigan Department of Health and Human Services or your local benefits office to confirm how SSDI affects your specific situation.

What if I moved to Michigan from another state—do I owe back taxes?

No. SSDI is not taxed in Michigan, and it was not taxed in most other states either. Some states do tax SSDI (Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont). If you moved from one of those states, consult a tax preparer about whether you owe back taxes to your former state.

Can I deduct medical expenses related to my disability?

You may be able to deduct unreimbursed medical expenses on your federal return if they exceed 7.5 percent of your adjusted gross income. This is a federal deduction, not a Michigan one. Medical expenses do not reduce your SSDI or affect whether it is taxable, but they may reduce your overall taxable income. A tax preparer can advise whether this deduction helps you.

What if I receive both SSDI and SSI?

SSDI and SSI are separate programs. SSDI is based on your work record; SSI is based on need and income limits. If you receive both, neither is taxed in Michigan. Federally, only SSDI may be taxable; SSI is never taxable. Report both on your federal return using the forms Social Security provides.