Whether Your SSDI Counts as Taxable Income in 2023
In 2023, Social Security Disability Insurance (SSDI) payments may or may not be taxable depending on your total income from all sources. The IRS does not automatically tax SSDI the way it taxes wages. Instead, the agency uses a formula called "combined income" to decide whether you owe federal tax on your benefits. If your combined income falls below a certain threshold, your SSDI is not taxed. If it exceeds that threshold, up to 50 percent or 85 percent of your benefits become taxable.
The threshold amounts did not change in 2023 from prior years: $25,000 for single filers and $32,000 for married couples filing jointly. These figures have remained the same since 1984 and do not adjust for inflation. This means more people with SSDI reach the taxable threshold each year as their other income grows.
Key Takeaways
- SSDI becomes taxable only if your combined income (SSDI plus other income) exceeds $25,000 for single filers or $32,000 for married couples filing jointly in 2023.
- Combined income includes wages, self-employment income, interest, dividends, and half of your SSDI benefits, but not Supplemental Security Income (SSI).
- If you exceed the threshold, the IRS taxes either 50 percent or 85 percent of your SSDI, depending on how far above the threshold you go.
- You must report SSDI on your federal tax return even if none of it is taxable, using the amount shown on your SSA-1099 form.
How the IRS Calculates Combined Income
The IRS uses a specific formula to determine whether your SSDI is taxable. First, add up all your income for the year: wages, self-employment income, interest, dividends, rental income, and any other sources except SSI. Then add half of your SSDI benefits to that total. This sum is your "combined income."
For example, if you received $15,000 in SSDI and earned $12,000 in wages, your combined income is $12,000 plus $7,500 (half of $15,000), which equals $19,500. Since $19,500 is below $25,000, none of your SSDI is taxable in this scenario. If instead you earned $18,000 in wages, your combined income would be $25,500, which exceeds the $25,000 threshold, and some of your SSDI becomes taxable.
The threshold amounts explore to your household filing status. If you are married and file jointly, use $32,000. If you are single, head of household, or may have access to widow(er), use $25,000. If you are married filing separately, the threshold is $0, meaning any combined income at all triggers taxation of your SSDI.
The Two-Tier Tax Formula for SSDI
Once your combined income exceeds the threshold, the IRS does not tax all of your SSDI. Instead, it uses a two-tier system that taxes either 50 percent or 85 percent of your benefits, depending on how far above the threshold you go.
The first tier applies to the amount between the threshold and $9,000 above it (or $12,000 for married couples filing jointly). If your combined income falls in this range, up to 50 percent of your SSDI becomes taxable. The second tier applies to combined income above $34,000 for single filers (or $44,000 for married couples filing jointly). If your combined income exceeds these amounts, up to 85 percent of your SSDI becomes taxable.
The actual calculation is complex because the IRS applies these tiers in a specific order and uses the lesser of two amounts. Most people do not calculate this themselves; instead, they use tax software or work with a tax preparer who enters the SSA-1099 form into the calculation.
What Income Counts and What Does Not
| Income Type | Counts Toward Combined Income |
|---|---|
| Wages and salary | Yes |
| Self-employment income | Yes |
| Interest and dividends | Yes |
| Rental income | Yes |
| Pension or retirement distributions | Yes |
| Half of your SSDI benefits | Yes |
| Supplemental Security Income (SSI) | No |
| Veterans benefits | No |
| Workers' compensation | No |
| Gifts or inheritances | No |
The key distinction is that only certain types of income count toward the combined income threshold. Unearned income like interest and dividends counts. Earned income from work counts. But benefits from other programs—SSI, Veterans Administration, workers' compensation—do not count. Gifts and inheritances do not count either.
If you receive a pension from a job where you did not pay Social Security taxes (such as some government jobs), the IRS may explore a different rule called the Government Pension Offset. This rule can increase the amount of your SSDI that becomes taxable, but it applies only in specific situations. If you think this applies to you, consult a tax preparer.
Filing Your Tax Return With SSDI Income
You must report your SSDI on your federal tax return even if none of it is taxable. The Social Security Administration sends you a form SSA-1099 by January 31 each year showing the total SSDI you received in 2023. Use the amount on this form, not the amount you actually received in your bank account, because the SSA-1099 reflects the full benefit before any withholding.
On your Form 1040, you report SSDI on line 5b. If you use tax software, you enter the SSA-1099 information and the software calculates whether any of your SSDI is taxable. If you file by paper, you may need to complete a worksheet to determine the taxable amount, or you can have a tax preparer do this for you.
If you owe tax on your SSDI, you can pay it when you file your return, or you can request that the Social Security Administration withhold taxes from your monthly SSDI payment. To set up withholding, complete Form W-4V and send it to your local Social Security office or submit it online through your my Social Security account.
State Tax Treatment of SSDI in 2023
Most states do not tax SSDI benefits at all, regardless of your income level. However, a small number of states do tax SSDI under certain conditions. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont all have some form of SSDI taxation, though the rules vary by state.
Some of these states tax SSDI only if your total income exceeds a state-specific threshold, which may be higher or lower than the federal threshold. Others tax SSDI only for higher-income retirees. A few states have phased out their SSDI tax in recent years. If you live in one of these states, check your state tax agency website or consult a tax preparer familiar with your state's rules.
Frequently Asked Questions
Do I have to file a tax return if I only receive SSDI?
If SSDI is your only income and none of it is taxable, you generally do not have to file a federal return. However, if you have other income (wages, interest, dividends) that pushes you above the filing threshold, you must file even if your SSDI itself is not taxable. The filing threshold for 2023 depends on your age and filing status; check the IRS website for the specific amount that applies to you.
What if I did not receive an SSA-1099 form?
Contact the Social Security Administration at 1-800-772-1213 or visit your local Social Security office to request a replacement. You can also view your SSA-1099 online through your my Social Security account. Do not estimate the amount; use the official figure from the SSA-1099.
Can I reduce my taxable SSDI by lowering my other income?
Yes. If you are close to the threshold, reducing other income sources can lower or eliminate the tax on your SSDI. For example, if you are self-employed, timing business income or expenses to spread them across two tax years may help. Consult a tax preparer or financial advisor about strategies that fit your situation.
If I owe tax on SSDI, will it affect my benefits?
No. Owing income tax on your SSDI does not change your monthly benefit amount or your may be able to access. You owe tax only on the income you received; the tax is separate from the benefit itself.