Are Social Security Disability Benefits Taxable? – Community News
Social Security

Are Social Security Disability Benefits Taxable?


That could depend on two things: the type of disability benefit you receive and your total income.

Social Security has two benefit programs for people with disabilities: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).

SSI is financial assistance for the disabled, blind and elderly with low incomes and limited financial resources. Social Security administers the program, but money from the U.S. Treasury, not your Social Security taxes, pays for it. SSI payments in 2021 maximum for an individual of $794 per month from the federal government, excluding fees in most states, and $1,191 for a married couple. These distributions are not subject to income tax.

However, SSDI is potentially taxable under the same rules as Social Security retirement, family, and survivor benefits.

Whether you pay taxes on SSDI distributions depends on what the Internal Revenue Service calls your “provisional income.” That’s the sum of your adjusted gross income, tax-free interest income, and half of your Social Security benefits for a given year. This is how it works:

  • If those three figures add up to less than $25,000 for an individual taxpayer or $32,000 for a married couple filing jointly, you don’t pay tax on your SSDI.
  • If your preliminary income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a couple filing jointly, up to 50 percent of your distributions are subject to tax.
  • If it’s more than $34,000 for an individual or $44,000 for a couple, you’ll be taxed on 50 to 85 percent of your benefits.

Let’s say you are a single submitter who will receive the average SSDI benefit of $1,277 per month in 2021. You have a part-time job that pays $15,000 a year and receives $5,000 from investments and dividends. Your provisional income is $27,662, half of your Social Security benefits plus $20,000 in other income.

You’re in the category that owes taxes on up to 50 percent of your distributions, although it would be significantly less in this example: Plugging these numbers into the IRS’s online tax tool, the Interactive Tax Assistant (ITA), gives you That $1,331 of your benefits are subject to federal income tax, at the same tax rate as other income — in this case, you’re in the 12 percent bracket.