Whether You Pay Tax on SSDI Depends on Your Total Income
You may owe federal income tax on your Social Security Disability Insurance (SSDI) benefits, but only if your combined income exceeds certain thresholds. Combined income means your adjusted gross income plus nontaxable interest plus half your SSDI benefits. The IRS uses this combined income figure, not your SSDI amount alone, to determine whether any of your benefits are taxable.
For 2024, if you file as single and your combined income is between $25,000 and $34,000, you may owe tax on up to 50 percent of your benefits. If your combined income exceeds $34,000, you may owe tax on up to 85 percent of your benefits. For married couples filing jointly, the thresholds are $32,000 and $44,000. These thresholds do not adjust for inflation, so they remain the same year to year.
The actual amount of tax you owe depends on your specific situation. The IRS has a worksheet in Publication 915 that walks through the calculation, but many people find it easier to have a tax preparer handle it or to use tax software that includes SSDI calculations.
Key Takeaways
- You only owe federal tax on SSDI if your combined income (wages, interest, and half your SSDI) exceeds $25,000 for single filers or $32,000 for married couples filing jointly.
- If you do owe tax, only a portion of your benefits—up to 50 or 85 percent depending on your income level—counts as taxable income.
- State income tax rules vary; some states do not tax SSDI at all, while others follow federal rules or have their own thresholds.
- The Social Security Administration does not withhold federal income tax from SSDI payments automatically, so you may need to make quarterly estimated tax payments if you expect to owe.
How the IRS Calculates Taxable SSDI
The IRS calculation starts with your combined income, which is your adjusted gross income plus nontaxable interest plus half your SSDI benefits. This combined income figure is what determines whether any of your benefits are taxable—not your SSDI amount by itself.
Once you know your combined income, you compare it to the IRS thresholds. For single filers in 2024, the first threshold is $25,000 and the second is $34,000. For married couples filing jointly, the thresholds are $32,000 and $44,000. If your combined income falls between the first and second threshold, up to 50 percent of your benefits may be taxable. If it exceeds the second threshold, up to 85 percent may be taxable.
The actual calculation is more detailed than a straightforward percentage. Publication 915 from the IRS contains a worksheet that accounts for the type of income you have and the order in which different income sources are taxed. Many people use tax software or a tax preparer to avoid errors, since the calculation can be confusing.
State Income Tax on SSDI
State tax treatment of SSDI varies widely. Some states do not tax SSDI at all, regardless of your income level. Other states follow the federal rules exactly. Still others have their own thresholds or exclude SSDI entirely for residents over a certain age.
States that do not tax SSDI include Alaska, Florida, Illinois, Mississippi, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. If you live in one of these states, you will not owe state income tax on your SSDI benefits. If you live elsewhere, check your state's tax agency website or ask a tax preparer, because the rules differ by state and sometimes by age.
If you moved during the year or receive income from multiple states, the rules become more complex. A tax preparer familiar with your state's rules can help you understand what you owe.
When You Need to Pay Tax Throughout the Year
The Social Security Administration does not withhold federal income tax from SSDI payments automatically. If you expect to owe tax on your benefits, you have two main options: you can have tax withheld from your SSDI payments, or you can make quarterly estimated tax payments to the IRS.
To request withholding from your SSDI payments, you file Form W-4V with the Social Security Administration. You can choose to have 10, 15, 25, or 28 percent of your monthly benefit withheld. This is simpler than making quarterly payments, because the money comes out of your SSDI check automatically.
If you have other income—from work, pensions, or investments—you may already be making quarterly estimated tax payments. In that case, you can adjust those payments to account for the tax you expect to owe on your SSDI benefits. The IRS Form 1040-ES helps you calculate quarterly payments.
Other Income That Affects Your SSDI Tax Situation
Any income you have counts toward your combined income threshold. This includes wages from work, interest and dividends, rental income, pension payments, and withdrawals from retirement accounts. Even a small amount of income can push you over the threshold and make some of your SSDI taxable.
If you are working while receiving SSDI, your wages count toward the combined income calculation. This is one reason some people receiving SSDI choose to work part-time or in limited capacity—the tax consequences of additional income can be significant. A tax preparer or financial advisor can help you understand how much work income you can have before your SSDI becomes taxable.
Nontaxable income also counts. This includes tax-exempt interest (such as interest from municipal bonds), workers' compensation, and certain other sources. The fact that this income is not itself taxable does not mean it does not count toward the threshold for determining whether your SSDI is taxable.
What Happens If You Do Not Pay Tax You Owe
If you owe federal income tax on your SSDI and do not pay it, the IRS can assess penalties and interest on the unpaid amount. The penalty for underpayment of estimated tax is separate from the penalty for filing late or paying late, so the total amount owed can grow quickly.
In some cases, the IRS can offset your SSDI payments to collect unpaid taxes. This means the Social Security Administration may reduce your monthly benefit to pay back taxes you owe. This is different from the voluntary withholding option, because it happens without your consent and may leave you with less money to live on.
If you realize you owe tax from a prior year, filing an amended return (Form 1040-X) and paying what you owe can reduce penalties and interest. The sooner you address it, the less the total cost will be.
Frequently Asked Questions
Can I avoid paying tax on SSDI by keeping my income below a certain amount?
Yes. If your combined income stays below $25,000 (single) or $32,000 (married filing jointly), none of your SSDI is taxable. However, combined income includes half your SSDI benefits, so the threshold is not as straightforward as it sounds. A tax preparer can help you understand whether you are below the threshold.
Does SSDI count as income for other tax purposes, like the Earned Income Tax Credit?
No. SSDI is not earned income, so it does not count toward the Earned Income Tax Credit. However, if you work and earn wages, those wages do count, and SSDI does not reduce your may be able to access for the credit. Check with a tax preparer if you think you may be may be able to access.
What if I receive both SSDI and Supplemental Security Income (SSI)?
SSI is not taxable, but SSDI is. If you receive both, only the SSDI portion counts toward the combined income threshold. The calculation can be complicated, so a tax preparer familiar with both programs is worth the cost.
Do I have to file a tax return if my only income is SSDI?
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 tax withheld from your SSDI payments, you may want to file to get a refund of that withholding. Check the IRS filing requirements for your specific situation.
Can I change how much tax is withheld from my SSDI payments?
Yes. You can file a new Form W-4V with the Social Security Administration at any time to change your withholding amount or to stop withholding altogether. Changes usually take effect within one or two months.