Social Security Disability & Taxes
Is Disability Income Taxable?
When you rely on Social Security Disability benefits to manage the costs of daily living, every penny counts.
These benefits give you the peace of mind you need to deal with a health condition that makes working impossible. But your budget is still tight. Disability benefits only cover necessities.
So is Social Security Disability taxable? Do they take some of your monthly check?
When you can’t work, you can’t earn an income. When you can’t earn an income, you don’t pay income taxes.
This is how it is supposed to work, and most often does.
But there are occasions where you do pay taxes on Social Security Disability.
If you get income through sources other than working, or if you are married to someone who works and earns an income, the IRS may see some of that as taxable.
The disability lawyers at Levine Benjamin Law Firm help you get your disability benefits in the first place. We don’t help you do your taxes. For your tax situation, you’ll need to talk to a tax professional.
But we are here to provide as many answers as we can when you’re going through the process of applying for Social Security Disability or trying to reverse a denial.
So as a resource for you, we prepared this page looking at the question, “Is disability income taxable?” Read below for more details.
Levine Benjamin has helped over 80,000 people in Detroit, Flint, Lansing, Grand Rapids, Toledo and across Michigan and Ohio regain a sense of financial stability through disability benefits.
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Is Social Security Disability Taxable? Some of Your Benefits Are Taxable in Certain Cases.
Because you can only qualify for Social Security Disability Insurance (SSDI) if you can’t work, most people don’t earn enough income to pay taxes on their benefits.
But your benefits can become taxable when you have other sources of income—such as dividends and interest from investments or your spouse’s income.
Those income sources, when combined with your disability checks, could meet or exceed the IRS’s limits on what you can earn and still avoid paying income taxes.
Knowing these limits is important to understanding your tax situation.
The first step is determining your “combined income.” The IRS calculates your combined income by adding up your other income plus half of your disability benefits.
For individual, unmarried taxpayers:
- If your combined income is from $25,000-$34,000, you’d have to count 50 percent of your disability benefits in your income taxes.
- If your combined income is more than $34,000, 85 percent of your disability benefits are taxable.
This doesn’t mean you give up 50 percent or 85 percent of your Social Security Disability benefits. It means you have to add those amounts to your total income when determining how much to pay.
For married taxpayers filing jointly:
- If your combined income is from $32,000-$44,000, 50 percent of your benefits are taxable.
- If your combined income is more than $44,000, 85 percent of your benefits are taxable.
If you are married filing separately, any income may be subject to taxes.
If you find yourself facing a tax hit, there are ways to ease the punch to your pocketbook.
For example, you can pay estimated taxes each quarter instead of all at once. In some cases, you can spread your taxable income over multiple years. Talk to a tax professional to determine what’s best for you.
If you think you need to get Social Security Disability benefits, what should you do first? Talk to the Michigan disability attorney team at Levine Benjamin Law Firm.
As you move up in age brackets, your case for Social Security Disability benefits gets stronger.
Do You Pay Taxes on Social Security Disability if You Receive SSI Benefits?
Social Security Disability Insurance (SSDI) is a benefits program for people who have worked for a substantial portion of their lives, paid into Social Security, but can no longer work because of their health.
Your SSDI benefits are calculated based on your past earnings.
If you receive Supplemental Security Income (SSI) disability benefits, you’re in a different group.
SSI is set aside for people who cannot work due to health problems—but don’t have much work history. It provides monthly checks to help with your basic living expenses, and it gives you access to Medicaid for health care.
You can only qualify for SSI at all if your income is below certain limits. So none of the income you receive through SSI is taxable, according to the IRS.
If you started receiving other sources of income besides SSI—enough that you’d have to pay taxes on it—you’d likely no longer receive SSI.
Managing your health issues is hard enough. Understanding Social Security benefits and any related taxes can seem like too much.
If you live in Michigan, Ohio or anywhere across America, you don’t have to go through all the hoops alone.
The disability lawyers at Levine Benjamin have the experience to ease your burden of dealing with the federal government and its complicated programs.