January 18, 2022

Are Social Security Disability Benefits Taxable?

That could depend on two things: the type of disability benefit you receive and your total income.

Social Security works two benefit programs for people with disabilities: Social Security Disability Insurance (SSDI) and Additional security income (SSI).

SSI is cash assistance for disabled, blind and elderly with low incomes and limited financial resources. Social Security runs the program, but money from the US Treasury, not yours Social Security Taxespays for it. Federal SSI payments in 2022 up to $841 per month for an individual and $1,261 for a married couple when both spouses are eligible. These distributions are not subject to income tax.

However, SSDI is potentially taxable and subject to the same tax rules as Social Security retirement, family and survivor benefits.

Whether you pay taxes on SSDI distributions depends on what the Internal Revenue Service calls your “provisional income.” That’s the sum of your adjusted gross income, tax-free interest income, and half of your Social Security benefits for a given year. This is how it works:

  • If those three figures add up to less than $25,000 for an individual taxpayer or $32,000 for a married couple filing jointly, you don’t pay tax on your SSDI.
  • If your preliminary income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a couple filing jointly, up to 50 percent of your distributions are subject to tax.
  • If it’s more than $34,000 for an individual or $44,000 for a couple, you’ll be taxed on 50 to 85 percent of your benefits.

Let’s say you are a single applicant who received the average SSDI benefit of $1,282 per month in 2021. You had a part-time job that paid $15,000 and you received $5,000 from investments and dividends. Your provisional income was $27,692, half your Social Security benefits plus $20,000 in other income.

You’re in the category of taxing up to 50 percent of your distributions, although it would be significantly less in this example: Plugging these numbers into the IRS’s online tax tool will Interactive Tax Assistant, indicates that $1,346 of your benefits would be subject to federal income tax at the same time tax rate as other income – in this case you are in the 12 percent bracket.

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