Are Social Security Disability Payments Taxable?

Your Social Security Disability / Insurance (SSD / SSI) benefits may be subjected to being taxed. This would depend upon how you file, and if you have other sources of income. If your Social Security benefits are your only source of income which you have received in the past year, then more than likely these benefits are not subject to income tax. If you have earned other money, then you will need to calculate whether your adjusted gross income is grater than the limits currently set by the Internal Revenue Service.

Social Security Disability Sole Source Income

If your sole source of income during the taxable year was your SSD / SSI benefits then it is not necessary to file tax return with the IRS. The income from your benefits will generally fall below the limits set by the government and none of this income will be subject to federal taxes. This rule also applies to all married couples filing jointly, where neither spouse has any income other than their SSD / SSI benefits.

Other Sources of Income – Calculations and Limits

If any individual, or spouse in the case of married couples, has earned income from other sources, than you should complete an IRS 1040 Form to calculate if you have any income subject to tax. The form an accompanying instructions will explain how to make these calculations, and will provide the limits to determine what, if any, of your income is subject to tax. As a general rule, an individual filing single, may be subject to tax if their adjusted income falls above $25,000, while those whole file jointly might have to pay tax if their adjusted income rises above $32,000.

Although these rules may seem simple, it would be wise to consult a tax professional to review your specific set of facts. A qualified tax professional or financial planner will be able to meet with you and / or your spouse to gather of the necessary facts, data, and information. He will need all of our tax documents. This would include but is not limited to the following:

  • Checking account and savings account statements
  • Bill payments
  • W-2’s
  • 1099 Forms
  • Interest payments
  • Investment income
  • Medical payments

Once you have gathered all of this information, your tax consultant should then be able to determine exactly how much, if any of, your disability payments will be subject to Federal, State, or Local tax.