What taxes you owe on SSDI depends on your other income

Social Security Disability Insurance (SSDI) is taxable only if your combined income exceeds certain thresholds set by the IRS. Combined income means your SSDI benefits plus any wages, self-employment income, interest, dividends, and other sources added together. If you have little or no other income, you likely owe no federal tax on your SSDI. If you do have other income, part of your SSDI may be taxable—but not all of it, and the amount depends on how much you earn outside of SSDI.

The IRS uses a formula based on your "combined income" to determine the taxable portion. For 2024, if your combined income is below $25,000 (single filer) or $32,000 (married filing jointly), you owe no tax on SSDI. Above those thresholds, up to 85% of your SSDI can be taxed, but the actual percentage depends on how far above the threshold you go. This is different from most income—you cannot be taxed on 100% of your SSDI benefits.

Key Takeaways

  • SSDI is only taxable if your combined income (SSDI plus all other income) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
  • The IRS uses a two-tier formula: the first tier taxes up to 50% of benefits, and the second tier taxes up to an additional 35%, for a maximum of 85% of your SSDI.
  • You must report SSDI on your federal tax return even if none of it is taxable, using Form SSA-1099 sent by Social Security.
  • State income tax treatment of SSDI varies: some states do not tax SSDI at all, while others follow federal rules or have their own thresholds.
  • If you owe tax on SSDI, you can have Social Security withhold federal income tax directly from your monthly payment to avoid a large bill at tax time.

How the IRS calculates taxable SSDI using the two-tier formula

The IRS applies a two-step calculation. First, it compares your combined income to $25,000 (or $32,000 if married filing jointly). If you are below that line, you owe no tax on SSDI. If you are above it, the IRS moves to the second step.

In the first tier, the IRS takes the smaller of (a) 50% of your SSDI benefits, or (b) 50% of the amount your combined income exceeds the threshold. This amount is added to your taxable income. If your combined income is still higher, the IRS moves to the second tier, where it takes the smaller of (a) 85% of your SSDI benefits minus what was already counted in tier one, or (b) 85% of the amount your combined income exceeds $34,000 (or $44,000 if married). The result is added to your taxable income.

An example: suppose you are single, receive $1,500 per month in SSDI ($18,000 per year), and earn $10,000 from part-time work. Your combined income is $28,000. You are $3,000 above the $25,000 threshold. In tier one, the smaller of (a) 50% of $18,000 = $9,000, or (b) 50% of $3,000 = $1,500 is $1,500. You owe tax on $1,500 of your SSDI. You do not reach tier two because your combined income ($28,000) is below the $34,000 second threshold.

Reporting SSDI on your tax return

Social Security sends you a Form SSA-1099 each January showing the total SSDI you received in the prior year. You must report this amount on your federal tax return even if none of it is taxable. The form goes to you and to the IRS, so the IRS already knows you received SSDI.

You report SSDI on Form 1040 (the main federal income tax form) on the line labeled "Social security benefits." You also complete Worksheet A or Worksheet B (included in the Form 1040 instructions) to calculate how much of your SSDI is taxable. If you use tax software, it will walk you through these calculations. If you file by hand, the IRS instructions for Form 1040 explain the worksheet step by step.

If you are married filing jointly, both spouses' SSDI and all other income are combined for the threshold calculation, even if only one spouse receives SSDI. This can push a couple over the threshold when one spouse alone would not be.

State income tax treatment of SSDI

Thirteen states do not tax SSDI at all: Colorado, Delaware, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Massachusetts, Michigan, Mississippi, Missouri, and Pennsylvania. If you live in one of these states, you owe no state income tax on SSDI regardless of your other income.

Other states follow federal rules: they tax SSDI only if your combined income exceeds the federal thresholds, and they use the same two-tier formula. These include California, Connecticut, Florida, Hawaii, Maryland, Minnesota, Montana, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Vermont, Virginia, and West Virginia.

A few states have their own rules. Utah taxes SSDI but allows a deduction. Vermont taxes SSDI but exempts it for residents over 62. Check your state's tax agency website or ask a tax preparer if you are unsure whether your state taxes SSDI.

Withholding federal income tax from your SSDI payment

If you know you will owe federal income tax on your SSDI, you can ask Social Security to withhold a percentage of your monthly payment and send it to the IRS. This prevents a large tax bill at tax time and is often simpler than making quarterly estimated tax payments.

To set up withholding, contact Social Security by phone at 1-800-772-1213, visit your local Social Security office, or use your my Social Security account online at ssa.gov. You can choose to withhold 7%, 10%, 15%, or 20% of your monthly benefit. Once you request withholding, it stays in place until you ask Social Security to change or stop it.

Withholding is voluntary. If you do not withhold and owe tax, you will owe it when you file your return. You can also make quarterly estimated tax payments using Form 1040-ES if you prefer, though most SSDI recipients find withholding simpler.

How work incentives and other income affect your tax bill

If you work while receiving SSDI, your wages count toward combined income and may push you over the tax threshold. However, SSDI has work incentives that can reduce the amount of your benefits you lose due to work—these do not reduce the amount of SSDI that is taxable for federal income tax purposes. In other words, even if you keep your full SSDI payment because of a work incentive, the IRS still counts the full amount when calculating combined income.

Other income that counts toward combined income includes interest and dividends from savings or investments, rental income, self-employment income, pensions, and distributions from retirement accounts. Unearned income from a spouse (if filing separately) does not count. If you receive Supplemental Security Income (SSI) in addition to SSDI, SSI does not count toward combined income and is never taxable.

What to do if you cannot pay the tax you owe

If you owe federal income tax on SSDI and cannot pay in full by the April important date, you have options. You can request an installment agreement with the IRS, which lets you pay in monthly amounts. You can also request an extension of time to file (though you still owe interest and penalties on unpaid tax). Contact the IRS at 1-800-829-1040 or visit irs.gov to learn about payment plans.

If you are low-income and owe a small amount, the IRS may be willing to temporarily delay collection. If you believe you made an error on your return, you can file an amended return using Form 1040-X. Keep records of your SSA-1099 and any withholding statements for at least three years in case the IRS has questions.

Frequently Asked Questions

Do I have to file a tax return if I only receive SSDI and have no other income?

No. 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 had federal income tax withheld from your SSDI, you should file to get a refund of that withholding.

Can I reduce my taxable SSDI by making charitable donations?

No. Charitable donations reduce your overall taxable income but do not change the amount of SSDI that is taxable. The IRS calculates taxable SSDI first using the two-tier formula, then applies deductions to your total income.

If I am married and my spouse works but I do not, do we have to file jointly?

No, you can file separately. However, filing separately may result in more of your SSDI being taxable because the threshold is lower for married filing separately ($25,000 combined). Filing jointly usually results in less tax. Consult a tax preparer to compare both options.

What if Social Security made an error on my SSA-1099?

Contact Social Security when ready at 1-800-772-1213 with your SSA-1099 and explain the error. Social Security will issue a corrected form. Do not file your tax return until you have the correct amount. If you already filed, you can file an amended return once you receive the corrected form.

Does Medicare premium withholding count as income for SSDI tax purposes?

No. Medicare premiums withheld from your SSDI payment do not reduce the amount of SSDI reported on your SSA-1099 or used to calculate combined income. The full SSDI amount counts, even though you receive less in your bank account.