Virginia does not tax SSDI payments

If you receive Social Security Disability Insurance (SSDI) in Virginia, the state will not tax those payments. Virginia's tax code specifically excludes SSDI from state income tax, which means you keep the full amount you receive from Social Security.

This is different from some other income sources. Wages, interest, and certain retirement payments are taxable in Virginia, but SSDI is not. The exemption applies whether you receive SSDI as a worker with a disability, as a widow or widower, or as a child of a worker who is disabled, retired, or deceased.

However, the federal government may still tax your SSDI depending on your total income for the year. Virginia's exemption only covers state taxes, not federal taxes. Understanding the difference between state and federal taxation is important because it affects how much you owe overall.

Key Takeaways

  • Virginia does not tax SSDI payments under state income tax law, so you will not owe Virginia state tax on those funds.
  • The federal government may still tax your SSDI if your combined income exceeds certain thresholds, even though Virginia does not.
  • Your "combined income" for federal tax purposes includes SSDI plus half of your SSDI plus other income like wages or pensions.
  • You will receive a Form SSA-1099 from Social Security each January showing how much SSDI you received, which you use when filing federal taxes.
  • Filing a federal tax return is often worth doing even if you owe no tax, because you may receive a refund from taxes withheld on other income.

How federal taxation of SSDI works

Even though Virginia does not tax SSDI, the federal government uses a formula to decide whether to tax it. The formula is based on your combined income, which is calculated differently than your regular income.

Combined income means: your adjusted gross income, plus nontaxable interest, plus half of your SSDI. For example, if you received $15,000 in SSDI and $10,000 in wages, your combined income would be $10,000 + (half of $15,000) = $17,500. This combined income figure determines whether any of your SSDI becomes taxable at the federal level.

If your combined income is below $25,000 (or $32,000 if you are married filing jointly), none of your SSDI is taxable to the federal government. If your combined income is above those thresholds, up to 50 percent or 85 percent of your SSDI may be taxable, depending on how far above the threshold you are. The exact percentage depends on how much income you have and your filing status.

What documents you receive and when

In January of each year, Social Security mails you a Form SSA-1099-SSDI (or Form SSA-1099 if you also receive other Social Security benefits). This form shows the total SSDI you received in the previous calendar year. You use this form to complete your federal tax return.

You should receive the form by January 31st. If you do not receive it by early February, you can call Social Security at 1-800-772-1213 to request a replacement copy or view it online through your my Social Security account.

Keep this form with your tax records. When you file your federal return, you will report the amount shown on the SSA-1099 to determine whether any portion of your SSDI is taxable. You do not report SSDI on your Virginia state tax return at all.

When you might owe federal tax on SSDI

You are most likely to owe federal tax on SSDI if you have other income in addition to your SSDI. Common sources of additional income include wages from work, self-employment income, pensions, interest, dividends, or rental income.

For example, if you work part-time and earn $20,000 in wages, plus receive $12,000 in SSDI, your combined income is $20,000 + $6,000 (half of SSDI) = $26,000. Since this exceeds the $25,000 threshold for single filers, some of your SSDI becomes taxable at the federal level. The exact amount depends on how much you exceed the threshold.

If you have no other income and live only on SSDI, you will almost certainly owe no federal tax on it. The thresholds are set high enough that most people receiving only SSDI fall below them.

Filing your federal return even if you owe no tax

Even if your SSDI is not taxable and you have no other income, you may still want to file a federal tax return. This is true if you had any federal income tax withheld from wages or other sources during the year.

If you worked and had taxes withheld from your paychecks, but your total income is low enough that you owe no tax, filing a return allows you to claim a refund of those withheld amounts. You may also be able to claim the Earned Income Tax Credit (EITC) if you had wages and your income is below certain limits, which can result in a refund even if you owe no tax.

The IRS does not automatically refund money that was withheld. You must file a return to receive it. Many people with low incomes find that filing produces a refund check, even though they expected to owe nothing.

Virginia tax credits and deductions you may use

Because Virginia does not tax SSDI, you cannot claim a deduction or credit specifically for SSDI on your Virginia return. However, if you have other income that is taxable in Virginia, you may be able to reduce your Virginia tax through other means.

Virginia offers a Disabled Individual Tax Credit for people with disabilities who meet certain income limits. This credit is separate from SSDI and is based on your total income and filing status. You would claim this on your Virginia tax return (Form 760) if you meet the requirements.

Virginia also allows a standard deduction that varies by age and filing status. If your total Virginia taxable income (which would not include SSDI) is below your standard deduction, you owe no Virginia state tax. The standard deduction is higher if you are age 65 or older.

Reporting SSDI on other benefit applications

While Virginia does not tax SSDI, other programs and agencies may count SSDI as income when you explore for benefits. For example, Medicaid, SNAP (food information), housing information, and other means-tested programs count SSDI as income to determine whether you are financially may be able to access.

This is separate from taxation. A program may count SSDI as income for may be able to access purposes even though it is not taxable. When you explore for any benefit program, read the instructions carefully to see whether SSDI counts as income for that specific program.

Frequently Asked Questions

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

No. Since Virginia does not tax SSDI and SSDI is your only income, you have no Virginia state tax filing requirement. You may still want to file a federal return if you had taxes withheld from other income during the year, but Virginia requires no state return.

Will I owe federal tax on my SSDI if I work part-time?

Possibly. It depends on how much you earn and your combined income total. If your wages plus half your SSDI exceed $25,000 (single filer) or $32,000 (married filing jointly), some of your SSDI may be taxable federally. Use the combined income formula to estimate whether you will owe tax.

What if I move to Virginia from another state that taxes SSDI?

Once you move to Virginia, Virginia will not tax your SSDI going forward. However, you may still owe tax to your previous state for the portion of the year you lived there. Contact that state's tax authority about your filing obligations for the year you moved.

Can I claim SSDI as a dependent on someone else's return?

No. SSDI is not considered earned income for tax purposes, so it does not affect whether you can be claimed as a dependent. Your dependent status is based on other factors like age, relationship, and support. Receiving SSDI does not change this.

Where do I report SSDI on my federal tax return?

You report SSDI on Form 1040, the main federal income tax return. The amount from your SSA-1099 goes on the Social Security benefits line. If any portion is taxable based on your combined income, you will include the taxable amount in your total income for the year.