The IRS only taxes SSDI if your total income crosses a threshold

Whether you owe federal income tax on your Social Security Disability Insurance (SSDI) depends on how much other income you have. The IRS uses a formula called "combined income" to decide this. If your combined income stays below a certain level, you pay no tax on your benefits. If it goes above that level, you may owe tax on up to 85 percent of what you received.

The threshold amounts are set by the IRS and do not change with inflation, which means more people cross them each year. For 2024, the thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These numbers have stayed the same since 1984.

Combined income is not the same as your SSDI payment. It includes your SSDI benefits plus any wages, self-employment income, interest, dividends, and certain other sources. The IRS adds half of your SSDI benefits to these other sources to reach the combined income figure.

Key Takeaways

  • You may owe federal tax on SSDI only if your combined income (half your SSDI plus other income) exceeds $25,000 as a single filer or $32,000 if married filing jointly.
  • Combined income includes wages, self-employment earnings, interest, dividends, pensions, and rental income—not just SSDI.
  • If you cross the threshold, the IRS taxes up to 85 percent of your benefits, not 100 percent.
  • You report SSDI income on Form 1040 using the worksheet in the IRS instructions, and the Social Security Administration sends you a Form SSA-1099 each January.
  • State income tax rules vary widely—some states tax SSDI, others do not, and some have their own income thresholds.

How the IRS calculates what portion of your benefits is taxable

The calculation has two tiers. In the first tier, if your combined income exceeds $25,000 (or $32,000 if married filing jointly), you may owe tax on up to 50 percent of your benefits. In the second tier, if your combined income exceeds $34,000 (or $44,000 if married), you may owe tax on up to 85 percent of your benefits.

The actual amount taxed depends on how far above the threshold you go. The IRS provides a worksheet in the instructions to Form 1040 that walks through the calculation step by step. You do not calculate this yourself on your tax return—you use the worksheet to find the taxable amount, then report it on line 5b of Form 1040.

The reason the IRS taxes only a portion of your benefits is that part of what you receive is considered a return of the taxes you paid into Social Security during your working years. The taxable portion reflects the portion that exceeds what you contributed.

What counts as income for the combined income test

Combined income includes far more than just your SSDI check. It includes W-2 wages from employment, net self-employment income, taxable interest and dividends, capital gains, rental income, pension payments, and distributions from retirement accounts like IRAs or 401(k)s. It also includes certain tax-exempt interest, such as interest from municipal bonds.

What it does not include: Supplemental Security Income (SSI), which is a separate program; veterans' benefits; workers' compensation; or certain other need-based benefits. If you receive SSI in addition to SSDI, the SSI does not count toward combined income.

If you work while receiving SSDI, your wages count in full toward combined income. This is one reason why working can push you over the tax threshold even if your SSDI payment alone would not. A person earning $20,000 in wages plus $15,000 in SSDI has a combined income of $27,500 (half of $15,000 plus $20,000), which exceeds the $25,000 threshold.

How to report SSDI on your federal tax return

Each January, the Social Security Administration sends you a Form SSA-1099, which shows the total SSDI benefits you received in the prior year. You use this form to complete your tax return. You report the full amount shown on the SSA-1099 on line 5a of Form 1040, then use the IRS worksheet to calculate the taxable portion and report that on line 5b.

If you did not receive an SSA-1099 by early February, you can request one by calling Social Security at 1-800-772-1213 or by visiting your local Social Security office. You need this form to file accurately, even if you believe you owe no tax on your benefits.

If your combined income is below the threshold, you still report the full SSDI amount on line 5a, but line 5b will be zero. Filing this way creates a record that you reviewed your income and determined no portion was taxable.

State income tax rules for SSDI vary widely

Federal tax rules explore nationwide, but state income tax treatment of SSDI is different in every state. Some states do not tax SSDI at all, regardless of your income level. Other states tax SSDI using the same federal thresholds. Still others have their own thresholds or tax SSDI only if you also owe federal tax on it.

States that do not tax SSDI include Alaska, Florida, Illinois, Louisiana, Mississippi, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you owe no state income tax on your SSDI even if you owe federal tax.

If you live in a state that does tax SSDI, contact your state tax authority or check your state's tax instructions to learn the rules. Some states follow the federal combined income test; others use a different calculation. A few states tax SSDI only if your total income (not combined income) exceeds a certain amount.

What happens if you owe tax on your SSDI

If your combined income puts you over the threshold, you owe federal income tax on the taxable portion of your benefits. You pay this tax the same way you pay tax on any other income: by filing Form 1040 and paying the amount due by April 15, or by having tax withheld from your SSDI check throughout the year.

You can request that Social Security withhold federal income tax from your SSDI payment. To do this, complete Form W-4V and send it to your local Social Security office or mail it to Social Security. You can choose to have 10, 15, 25, or 28 percent of your benefit withheld. Many people use withholding to avoid owing a large amount when they file their return.

If you do not have tax withheld and owe more than $1,000 when you file, you may also owe an estimated tax penalty. The IRS charges this penalty if you did not pay enough tax throughout the year. Setting up withholding is often simpler than calculating and paying estimated taxes on your own.

How working affects your SSDI and your taxes

If you work while receiving SSDI, your wages count toward combined income, which can push you over the tax threshold. Additionally, if your earnings are high enough, they may affect your SSDI payment itself under Social Security's work incentive rules.

Social Security allows you to work and still receive benefits during a trial work period and an extended period of may be able to access. During these periods, your benefits continue even if your earnings are high. However, those earnings still count toward combined income for tax purposes, so you may owe federal or state income tax on your SSDI even though your benefits are not reduced.

After the trial work period ends, if your earnings exceed the substantial gainful activity (SGA) level—$1,550 per month in 2024—Social Security may stop your benefits. The SGA amount changes each year. Even if your benefits stop, any SSDI you received during the year still counts as income for tax purposes.

Frequently Asked Questions

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

Not necessarily. If SSDI is your only income and it is below the filing threshold for your age and filing status, you do not have to file. However, if you have other income—even a small amount of interest or wages—you may need to file to determine whether your combined income puts you over the tax threshold for SSDI.

What if I did not know I owed tax on my SSDI and did not file?

Contact a tax professional or your local IRS office to discuss filing back returns. The IRS generally allows you to file amended returns for the past three years. Filing late may result in penalties and interest, but filing is better than not filing.

Can I reduce my combined income to avoid owing tax on SSDI?

You cannot reduce SSDI itself, but you can manage other income sources. For example, you might defer taking distributions from an IRA, or time the sale of investments to spread gains across multiple years. A tax professional can review your specific situation and suggest strategies.

If I live in a state that does not tax SSDI, do I still owe federal tax?

Yes. State and federal taxes are separate. Living in a state with no SSDI tax means you owe no state income tax on your benefits, but you still owe federal tax if your combined income exceeds the federal threshold.

Does SSI count toward the combined income test for SSDI taxes?

No. Supplemental Security Income (SSI) is a separate program and does not count toward combined income. Only SSDI counts. If you receive both programs, only your SSDI is included in the calculation.