Do social security disability recipients have to file taxes

Q: Can I get a tax refund if I am on Social Security disability?

Receiving SSDI or SSI benefits doesnt prevent you from receiving a tax refund. Whether you owe taxes or not, you should file a tax return if you think you qualify for any of the above credits discussed above.

Do You File Taxes When Receiving Disability Payments?

When you work as an individual for a company, your employer deducts taxes from your paycheck. Every year you receive a W-2 form telling you how much your income is taxable and the taxes you have paid for the year. Once you file your taxes, you can see how much you owe or how much the government owes you. In fact, those taxes are what make disability benefits possible.

Table of Contents Show

Do You File Taxes When Receiving Disability Payments?
Is it Taxable?
Withholding Taxes on Benefits
Do I have to file taxes if I only receive Social Security disability?
Can I get a tax refund if I am on Social Security disability?
Do I have to report disability income on my tax return?

This process fairly straightforward. However, for Social Security Disability (SSDI) recipients, it isn’t that simple. Disability payments aren’t always taxable. So, when do you file taxes when receiving disability payments? The easy answer is always. You file taxes when you have income. Here are ways to see if your benefits are taxable.

Is it Taxable?

First, it’s important to know that we are only discussing SSDI benefits. Supplemental Security Income (SSI) is a needs-based benefit, and therefore not enough income is earned for it to be taxed. According to the Social Security Administration (SSA), it is commonly marital status and income that determine whether you pay taxes on your SSDI benefits.

Your Social Security Disability benefits are not taxable if:

You file taxes as an individual and make less than $25,000 annually.
You file taxes jointly with a spouse and combined you make less than $32,000 annually.

However, if your income exceeds those amounts:

50% of your benefits are taxable if you file taxes as an individual or jointly with a spouse and make less than $44,000.
85% of your benefits are taxable if you file taxes as an individual or jointly with a spouse and make more than $44,000.

Withholding Taxes on Benefits

You may already know, based on your income, you will pay taxes on your SSDI. You can request that the SSA withhold taxes from your payments. This will help make sure you don’t owe or at least owe less come tax season. The SSA will not withhold automatically, so it’s important you contact them directly to make any arrangements.

It is recommended that you contact a tax professional or purchase tax prep software to assist you in filing your taxes. If you have questions about Social Security Benefits or need to file a claim, contact Disability Support Services today. We are here for you and can help you with questions like these and more. Call us at (410) 244-0006 or fill out our free evaluation online.

On April 27, 2019 / Your Benefits

Some Social Security Disability beneficiaries have to pay federal income taxes on their Social Security Disability benefits, while others do not. Generally speaking, if Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) is your only sources of income, you will not have to pay any federal income taxes on your Social Security Disability benefits.

About 2/3 of Social Security Disability recipients don’t pay federal income taxes on their Social Security Disability payments. Whether or not you have to pay taxes is determined by your level of income. In 2011, you do not have to pay federal income taxes if your combined taxable income is not greater than $25,000 for a single person or $32,000 for a married couple filing jointly.

State and local income taxes may apply to your disability benefits, and you will want to check with your state and local authorities or your income tax preparer or accountant to make sure that you are aware of any state or local income taxes you will need to pay. In most cases, if you are exempt from federal income tax on your Social Security disability benefits, you won’t have to pay any income tax, but you should confirm this with an accountant.

It is especially important that you see an accountant or tax preparer when you start collecting SSDI if your income is high enough that you expect to pay taxes. You will want to make sure that you have enough deducted or set enough money aside to cover your income tax obligations.

It is worth noting that Social Security Disability benefit payments are taxed differently than other income. Generally speaking, only half of your Social Security Disability benefit payments are counted as taxable income. Of course, the rest of your income is taxable under the normal rules, regulations, and laws which apply.

To determine whether or not you will need to pay federal income taxes on your Social Security Disability Insurance payments, you will need to add up all of your income. This includes:

Half of your income from Social Security Disability payments.
All of your taxable pension payments.
Any wages you earn. (Remember that if you earn more than $1,000 per month, you are considered gainfully employed and may be disqualified for Social Security Disability).
All interest on savings accounts or similar savings vehicles, including tax sheltered or tax deferred interest.
All dividends on stocks, bonds, mutual funds, or other investments.
All passive income, such as rent.
All other normally taxable income.

If, after you add all sources of income together (remembering that you only need to factor in half of your Social Security Disability payments), check to see whether you are above or below the limit. If you are making more than $25,000 (or $32,000 for a married couple), your Social Security Disability benefits are taxable and you will need to pay federal income tax on them.

If you are married, but filing separately, your Social Security Disability benefits will be taxable, regardless of what your income actually is. Additionally, if you are making more than $34,000 (for a single individual) or $44,000 (for a married couple), you may be taxed on up to of your Social Security Disability payments.

Taxes on disability payments can be rather complicated. If you had retained the help of a disability attorney during the claims process, be sure consult with that individual regarding disability benefits and taxable income.

However, if your only income is from Social Security benefits, you don't typically include these benefits in your gross income. If this is the only income you receive, then your gross income for taxes equals zero, and you typically don't have to file a federal income tax return.

Receiving SSDI or SSI benefits doesn't prevent you from receiving a tax refund. Whether you owe taxes or not, you should file a tax return if you think you qualify for any of the above credits discussed above.

Do I have to report disability income on my tax return?

You must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer: If both you and your employer have paid the premiums for the plan, only the amount you receive for your disability that's due to your employer's payments is reported as income.