Are Social Security Disability Benefits Taxed?

January 27, 2021

It’s tax time again. While many may be able to get a nice return from their filing, it’s never exactly a fun time of year. And if you are currently receiving social security disability benefits (SSDI), you may want to know how that affects your tax filing. Specifically, if your SSDI benefits will be taxed.

Are Social Security Disability Benefits Taxed?

The question on the taxing of SSDI benefits isn’t completely cut and dried. While social security disability benefits can be subject to tax, most people don’t actually end up paying tax on them due to their income being too low. On average, about one-third of SSDI recipients end up being taxed on them. Most of these are due to household income, including their spouse’s income, meeting the threshold. The taxing of your benefits also depends on what state you live in (see below).

Supplemental Security Income (SSI), on the other hand, is not taxed at all, in any scenario. SSI is a needs-based program, with those qualifying for it already being low income.

Federal Tax Breakdown of Social Security Disability Benefits

The scenarios for being taxed on your social security disability benefits break down in two basic ways, depending on if you are single or married.

For a single person, earning more than $25,000 per year, with half of that total coming from SSDI benefits, your benefits will be taxed to some degree. For a married couple, the threshold is $32,000 per year, also including half of the SSDI benefits, for being subject to taxation.

2021 covid relief checks and ssdiAs for the actual amount that SSDI benefits will be taxed, it breaks down depending on how far above the single and married thresholds your income is. If monthly income for a single person eclipses $2,083, the calculation becomes a little more difficult. The Social Security tax calculator can help with this equation.

The SSDI benefits will be taxed at the marginal income rate, meaning that the tax rate would be a portion of your benefits, leaving you at a low rate of taxation on benefits overall.

Breakdown of Taxes for Social Security Disability Benefits

Individuals

Monthly IncomeAnnual IncomeSSDI Tax Rate Maximum
Up to $2,083Up to $25,0000%
$2,084 - $2,833$25,000 - $34,00050%
$2,834+$34,000+85%

Married Couples

Monthly IncomeAnnual IncomeSSDI Tax Rate Maximum
Up to $2,666Up to $32,0000%
$2,667 - $3,666$32,000 - $44,00050%
$3,667+$44,000+85%

Do I Pay Social Security Disability Taxes in Wisconsin?

Many states do not tax social security disability benefits, but there is a number that do. Like many things with the benefits you draw, your particular circumstances depend on where you live. If you live in the state of Wisconsin, you will not be taxed on your social security disability benefits. This means that SSDI recipients in our headquarters home state do not have to worry about their benefits when considering their tax payments.

As for the states that do tax SSDI benefits, the list is as follows:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Does Social Security Disability Backpay Get Taxed?

There are many scenarios where SSDI recipients are able to get back pay to compensate from the time they became disabled until they were approved for benefits. This money can also be taxable, but there is a way to mitigate the tax payments when you receive a lump sum. You are allowed to apply the benefit to prior tax returns, which will lower the income for the current year.

If you have questions on SSDI or SSI benefits or have been denied, get in touch with our professionals today. Talking to us is no-cost and risk-free, and you don’t owe anything unless we win. Get in touch with us today at 844-432-0114 or fill out a form on this page.

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