What tax breaks come with SSDI

SSDI itself does not automatically lower your taxes. However, if you receive SSDI and your total income stays below certain thresholds, you may owe no federal income tax at all — even though you would owe taxes at that same income level if it came from wages. The reason is that SSDI has its own tax rules, separate from regular income.

The main tax benefit is that SSDI payments do not count as earned income. This matters because the standard deduction — the amount you can earn before owing any tax — is higher for people who do not work. If SSDI is your only income and it stays below that standard deduction, you file a tax return but owe nothing.

A second benefit applies if you have both SSDI and other income. The way the IRS counts SSDI toward your taxable income is different from the way it counts wages, and in many cases this difference saves you money.

Key Takeaways

  • If SSDI is your only income and stays below the standard deduction for your filing status, you owe no federal income tax.
  • SSDI does not count as earned income, so you may may have access to for tax credits like the Earned Income Tax Credit even if you receive benefits.
  • If you have both SSDI and wages or self-employment income, only a portion of your SSDI may be taxable, depending on your total income.
  • You must file a tax return to claim refundable credits like the Additional Child Tax Credit, even if you owe no tax.
  • State taxes on SSDI vary widely — some states do not tax SSDI at all, while others tax it like regular income.

How the standard deduction protects SSDI recipients

The standard deduction is the amount of income you can have before you owe federal income tax. For 2024, the standard deduction is $14,600 for a single person and $29,200 for a married couple filing jointly. These amounts change each year.

Because SSDI does not count as earned income, you get the standard deduction for non-workers — which is the same amount as the standard deduction for workers. This means if your SSDI payments total $14,600 or less in a year and you have no other income, you owe no federal tax. You may still want to file a return to claim refundable credits, but you will not owe anything.

If you have both SSDI and wages, the calculation is more complex. You add your wages and your SSDI together, then subtract the standard deduction. Only the amount above the standard deduction is taxable — and even then, only part of your SSDI counts toward that taxable amount.

When SSDI becomes taxable income

SSDI becomes taxable only when your total income crosses a threshold set by the IRS. The threshold depends on your filing status and whether you have other income besides SSDI.

For a single person with only SSDI income, the threshold is roughly $25,000. For a married couple filing jointly, it is roughly $32,000. These are not exact cutoffs — the IRS uses a formula called the "combined income" test. If your combined income (half your SSDI plus all your other income) exceeds these amounts, part of your SSDI becomes taxable.

The taxable portion is never more than 85 percent of your SSDI, even at very high income levels. This is a hard cap built into the tax code. So even if you have substantial other income, the majority of your SSDI stays tax-free.

Tax credits you may still claim with SSDI

One of the largest tax benefits for SSDI recipients is the ability to claim certain tax credits even though SSDI is not earned income. The most common is the Earned Income Tax Credit (EITC), which is designed for people with low to moderate income from work.

You can claim the EITC if you have wages or self-employment income, even if you also receive SSDI. The EITC does not care that part of your income comes from benefits — it only looks at your earned income. If you have a child or children, the EITC can be substantial: up to $3,995 for one child, $6,568 for two children, or $6,935 for three or more children in 2024.

The Child Tax Credit and Additional Child Tax Credit are also available to SSDI recipients. You can claim these credits if you have dependent children, regardless of whether your income comes from work or benefits. The Additional Child Tax Credit is refundable, meaning you can receive money back even if you owe no tax — but you must file a return to claim it.

The Saver's Credit (also called the Retirement Savings Contributions Credit) may be available if you have earned income and contribute to a retirement account. SSDI alone does not disqualify you.

State and local taxes on SSDI

Federal tax rules are one thing; state rules are another. Some states do not tax SSDI at all. Others tax SSDI the same way the federal government does — only if your income exceeds a threshold. A few states tax SSDI like regular income.

States that do not tax SSDI include California, Florida, Illinois, Louisiana, Mississippi, New York, Ohio, Pennsylvania, and Texas. However, this list changes, and some states have income thresholds above which they do tax SSDI. Check your state's department of revenue website or call your state tax office to learn the rule where you live.

If you live in a state that taxes SSDI, you may still owe nothing if your income is low enough. The state threshold is often different from the federal threshold, so you could owe federal tax but not state tax, or vice versa.

Filing a tax return when you receive SSDI

You are not required to file a federal tax return if your SSDI is your only income and stays below the standard deduction. However, you should file if any of the following is true: you have wages or self-employment income, you have other income like interest or dividends, you want to claim the EITC or Child Tax Credit, or you had taxes withheld from your SSDI during the year.

To file, you will need your SSA-1099 form, which Social Security sends by January 31 each year. This form shows how much SSDI you received. You will also need any other income documents — W-2 forms from employers, 1099 forms from banks or investment accounts, and so on.

You can file on your own using free tax software, through a volunteer tax preparation site, or with a tax professional. The IRS Free File program offers free software to people with income below a certain level. VITA (Volunteer Income Tax information) sites offer free preparation by trained volunteers.

What to do if you have both SSDI and work income

If you work while receiving SSDI, your tax situation becomes more complex, but it can still be favorable. Your wages are earned income, which means you can claim the EITC and other work-related credits. Your SSDI is not earned income, so it does not reduce the credits you can claim.

However, your wages and SSDI together determine whether part of your SSDI becomes taxable. The IRS formula counts half your SSDI plus all your other income. If that total exceeds the threshold for your filing status, some of your SSDI is taxable.

The good news is that the credits you claim — especially the EITC — often exceed the tax you owe on your combined income. Many people with both SSDI and wages end up with a refund. A tax professional or the VITA program can help you figure out whether you will owe or receive money back.

Frequently Asked Questions

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

No, not if SSDI is your only income and it stays below the standard deduction for your filing status. However, you should file if you want to claim the EITC, Child Tax Credit, or other refundable credits — these can give you money back even if you owe no tax.

Can I claim the Earned Income Tax Credit if I get SSDI?

Yes, if you have wages or self-employment income. The EITC does not care that you also receive SSDI. Your SSDI does not count as earned income, so it does not reduce the credit you can claim based on your wages.

What is the SSA-1099 form and when do I get it?

The SSA-1099 is a tax form Social Security sends to all SSDI recipients by January 31 each year. It shows how much SSDI you received in the previous year. You need this form to file your tax return accurately.

Will my SSDI be taxed if I have other income?

Only if your combined income (half your SSDI plus all other income) exceeds roughly $25,000 for a single person or $32,000 for a married couple filing jointly. Even then, no more than 85 percent of your SSDI is taxable, and you may owe no tax if credits reduce your liability to zero.

Does my state tax SSDI?

It depends on where you live. Some states do not tax SSDI at all. Others tax it only if income exceeds a threshold, and a few tax it like regular income. Check your state's department of revenue website or call their tax office to learn the rule for your state.