For the year 2023, if an applicant is a single filer, they need to have 50% of the Social Security Disability Insurance (SSDI) benefits in their taxable income if their income comes between the range from $25,000 to $34,000 (if they are married and filing jointly then their income must be between $32,000 and $44,000) and up to 85% of their benefits if their income exceeds $34,000 or $44,000 (if married and filing jointly).

Applicants who are getting their SSDI benefits do not need to pay the income tax on the benefits. If someone is getting Supplemental Security Income (SSI), they do not owe any tax. However, there may be certain exceptions. (Get detailed information on the difference between SSDI and SSI).

Taxes On Disability Income

In the U.S., when you work and pay taxes for a long time, you get to be part of Social Security. It’s like a savings plan. If something happens, like you become disabled and can’t work, there’s a program called Social Security Disability Insurance (SSDI) to help you. It gives you money to support yourself and your kids if you have any. It’s like a safety net for when you can’t earn money due to a disability.

Is SSDI Taxable?

Whether SSDI is taxable depends on your total income. If the combined value of your SSDI benefits and other income exceeds a certain threshold set by the IRS (called the “base amount”), you may owe federal taxes on a portion of your SSDI payments. 

However, if SSDI is your sole income and it falls below the threshold, you won’t have to pay federal income tax on your SSDI benefits. The specific threshold varies based on your filing status. (Learn more about what SSDI benefits are, who is eligible and more)

How Much Of My SSDI Is Taxable?

If you’re married, and your total income is over $32,000 (or $25,000 for single filers), you might have to pay taxes on up to 85% of your SSDI benefits. The exact amount you pay depends on your income. 

If your income is below these thresholds, you generally won’t owe taxes on your SSDI benefits. Even if it’s above, not all of your disability benefits are taxed, but the percentage increases as your income goes up.

What Counts As Other Income?

Other income, apart from half of your SSDI benefits, includes money you earn from things like a part-time job, investments, stocks, bank interest, and retirement accounts like a 401(k) or IRA. 

If you’re married and filing taxes together, the IRS also looks at your spouse’s income, even if they didn’t get SSDI or Social Security benefits. Essentially, it’s a combination of what you make and any money your spouse brings in.

How To Calculate Your Total Income?

The IRS calculates your total income by adding half of your yearly SSDI payments to all your other earnings throughout the year. If you’re filing taxes jointly, you need to account for both your income and your spouse’s income in this calculation.

Total income = ½ of annual SSDI + all other annual income

Income threshold for tax on SSDI

Tax Filing Status Max Total Income Without Owing Tax
Married filing jointly $32,000
Single $25,000
Qualifying surviving spouse $25,000
Head of household $25,000
Married filing separately  $25,000 (It will be $0 if you and your spouse are living apart)

Need Help With Applying For SSDI or SSI? Contact a lawyer

A Social Security disability lawyer can be a crucial ally when applying for SSDI or SSI. They bring legal expertise to navigate the complex application process, ensuring that your case is presented comprehensively and in line with the specific requirements. 

They handle communications with the Social Security Administration and provide valuable support in case of any appeals or challenges during the process.

FAQs On Social Security Disability

Supplemental Security Income (SSI) is not considered taxable income, so recipients generally do not owe federal income taxes on their SSI benefits. (Learn more about what SSI benefits are, who is eligible, and more)
Social Security Disability Insurance (SSDI) back pay is typically subject to federal income taxes. However, the IRS allows you to allocate the lump sum retroactive payments to the years they were due, potentially reducing the taxable amount for a specific year.
To minimize taxes on SSDI benefits, consider managing other sources of income to stay below the taxable thresholds. Strategically timing withdrawals from retirement accounts or utilizing tax credits can help. Additionally, spreading out SSDI back pay allocations across multiple years may reduce the overall tax impact.