SSDI is taxed the same way in North Carolina as everywhere else in the United States

North Carolina does not tax SSDI benefits at the state level. This means you will not owe North Carolina income tax on your SSDI payments, regardless of how much you receive or what other income you have. However, your SSDI may still be taxable at the federal level, and that is what matters most for your tax return.

The federal government uses a formula called the "combined income" test to decide whether your SSDI is taxable. Combined income is the sum of your adjusted gross income, nontaxable interest, and half of your SSDI benefits. If that total exceeds a certain threshold, you must report part of your SSDI as taxable income on your federal return. North Carolina's lack of a state income tax does not change this federal calculation.

Because North Carolina has no state income tax, you will file only a federal return if SSDI is your only income. If you have wages, self-employment income, or other sources, you may still owe federal tax even though North Carolina will not tax you.

Key Takeaways

  • North Carolina does not impose state income tax on SSDI benefits, so you will never owe North Carolina tax on those payments.
  • Federal tax on SSDI depends on your combined income (adjusted gross income plus nontaxable interest plus half your SSDI), not on your state of residence.
  • If your combined income exceeds $25,000 as a single filer or $32,000 as a married couple filing jointly, part of your SSDI becomes taxable at the federal level.
  • You must file a federal tax return if SSDI plus other income exceeds the filing threshold, even though North Carolina will not tax you.

When federal tax applies to your SSDI in North Carolina

The federal combined income test is the only rule that matters. Calculate your combined income by adding three things: your adjusted gross income (wages, interest, dividends, and other income reported on your tax return), any nontaxable interest (such as interest from municipal bonds), and half of your SSDI benefits for the year.

If you are single and your combined income is $25,000 or less, none of your SSDI is taxable. If it is between $25,000 and $34,000, you may have to report up to 50 percent of your SSDI as taxable income. If it exceeds $34,000, you may have to report up to 85 percent of your SSDI as taxable income. The exact amount depends on how far over the threshold you go.

If you are married filing jointly, the thresholds are $32,000 and $44,000. If you are married filing separately, the threshold is $0 — meaning any combined income at all may trigger taxation of your SSDI.

North Carolina's absence of state tax does not lower these thresholds or change how they work. Your state of residence has no effect on the federal calculation.

Filing your federal return as an SSDI recipient in North Carolina

You must file a federal tax return if your income (including SSDI) exceeds the standard deduction for your filing status. For 2024, the standard deduction is $14,600 for a single filer and $29,200 for a married couple filing jointly. If your SSDI alone is below that amount and you have no other income, you do not have to file.

However, you should file even if you are not required to do so if you had federal income tax withheld from other sources (such as wages) or if you are owed a refund. Filing allows you to recover that money.

When you file, you will report your SSDI on Form SSA-1099, which the Social Security Administration sends to you by January 31 each year. You will use this form to calculate your combined income and determine whether any of your SSDI is taxable. The IRS provides a worksheet in the instructions to Form 1040 to help you make this calculation.

What happens if you owe federal tax on SSDI

If part of your SSDI becomes taxable, you can pay the tax in one of two ways: when you file your return, or by having Social Security withhold federal income tax from your monthly SSDI payment.

To request withholding, you file Form W-4V with the Social Security Administration. You can choose to have 7, 10, 12, or 22 percent of your monthly benefit withheld. This approach spreads the tax burden across the year and may help you avoid a large bill when you file. You can change or stop withholding at any time by submitting a new Form W-4V.

If you do not request withholding and you owe tax, you must pay it when you file your return. Some people pay estimated tax quarterly instead, using Form 1040-ES, though this is less common for SSDI recipients.

Other North Carolina tax considerations for SSDI recipients

North Carolina offers a tax credit for disabled and elderly residents, but SSDI recipients are not automatically included. The credit applies only to residents age 59 or older (or any age if permanently and totally disabled under Social Security rules) with income below certain limits. If you receive SSDI because of a disability that meets Social Security's definition of permanent and total disability, you may be able to claim this credit on your federal return, though it is a federal credit, not a North Carolina one.

You should also know that if you receive Supplemental Security Income (SSI) in addition to SSDI, SSI is never taxable at either the federal or state level. Only SSDI is subject to the combined income test.

Because North Carolina has no state income tax, you will not file a state return unless you are self-employed and owe self-employment tax. If you are self-employed, you must file a federal return to pay self-employment tax, but you will not owe North Carolina income tax.

Keeping records for your SSDI taxes

Save your Form SSA-1099 each year. This is your official record of SSDI income and is required to file your federal return accurately. Social Security sends it by January 31, but you can request a replacement copy online through your my Social Security account or by calling 1-800-772-1213 if you lose it.

Keep records of any federal tax withheld from your SSDI payments. If you requested withholding using Form W-4V, Social Security will report the amount withheld on your Form SSA-1099 in Box 5. This amount counts as a payment toward your federal tax liability, so you need it to calculate whether you are owed a refund or owe additional tax.

If you have other income sources (wages, interest, dividends, rental income), keep those tax documents as well. These all factor into your combined income calculation and determine whether your SSDI is taxable.

Frequently Asked Questions

Do I have to file a North Carolina state tax return if I receive SSDI?

No. North Carolina has no state income tax, so you will never file a state return because of SSDI income. You only file a federal return if your total income (including SSDI) exceeds the federal filing threshold or if you want to claim a refund of withheld taxes.

Can I have federal tax withheld from my SSDI in North Carolina?

Yes. You can request federal income tax withholding by filing Form W-4V with Social Security. You choose the withholding rate (7, 10, 12, or 22 percent), and Social Security deducts it from your monthly payment. You can change or stop withholding anytime by submitting a new form.

What if I live in North Carolina but work part-time and receive SSDI?

Your wages plus your SSDI count toward your combined income for federal tax purposes. If the total exceeds the threshold for your filing status, part of your SSDI becomes taxable at the federal level. You must file a federal return to report both your wages and your SSDI. North Carolina will not tax either one.

Is SSI taxable in North Carolina?

No. Supplemental Security Income (SSI) is never taxable at the federal or state level, regardless of where you live. Only SSDI is subject to federal taxation based on combined income.

Where do I get Form SSA-1099 for my SSDI?

Social Security mails Form SSA-1099 to you by January 31 each year. You can also view and print it from your my Social Security account online, or call 1-800-772-1213 to request a replacement copy if you lose the original.