SSDI Taxation Implications
Navigating the tax implications of Social Security Disability Insurance (SSDI) benefits can be a complex process for many recipients. Understanding how these SSDI benefits are taxed is essential to ensure compliance with tax regulations and to effectively manage finances.
Let’s try to demystify the taxation of SSDI benefits.
SSDI Benefits and Tax Season
Social Security Disability Benefits ARE taxable, but most people do not actually pay taxes on those benefits. Those who do pay taxes have other income that when added to their disability benefit exceeds certain thresholds. Disabled people who receive benefits usually can’t work and earn more than a certain amount of money.
Step 1 – Take 50% of the Social Security benefit received during the year and add it to all other income.
- Filing Status is Single – if the above amount exceeds $25,000, then part of your benefit is likely taxable.
- Filing Status is Married Filing Jointly – if the above amount exceeds $32,000, then part of your benefit is likely taxable.
50% of a taxpayer’s benefit may be taxable if they are:
- Filing single, single, head of household or qualifying widowYou are the widow/widower of the worker if, at the time he or she died: You and the worker were validly married. You would have the status of a husband or a wife for that person’s personal property if he or she had no will. You went through a marriage ceremony in good faith that would have been valid except for a legal impediment. The minimum age for widows benefits is 60, or 50 if disabled. or widower with $25,000 to $34,000 income.
- Married filing separately and lived apart from their spouseYou are the spouse of the worker if: - You and the worker were married at the time you filed for benefits. - You would have the status of a husband or a wife for that person’s personal property if they had no will. - You went through a marriage ceremony in good faith, which would have been valid except for a legal impediment." for all of 2019 with $25,000 to $34,000 income.
- Married filing jointly with $32,000 to $44,000 income.
85% of a taxpayer’s benefits may be taxable if they are:
- Filing single, head of household or qualifying widow or widower with more than $34,000 income.
- Married filing jointly with more than $44,000 income.
- Married filing separately and lived apart from their spouse for all of 2019 with more than $34,000 income.
- Married filing separately and lived with their spouse at any time during 2019.
The IRS has created this great tool that will help you determine whether or not your benefits are taxable and they will tell you just about the exact amount of those benefits that are taxable. I highly recommend you go through the from in Are My Social Security or Railroad Retirement Tier I Benefits Taxable?.
Once you figure out your taxable income, you can use the table below to determine our tax rate. Multiple your taxable income by the taxable rate to determine the amount of tax that is due.
| Tax Rate | Single | Married Filing Jointly | Married Filing Separately | Head of Household |
|---|---|---|---|---|
| 10% | $0 to $11,000. | $0 to $22,000. | $0 to $11,000. | $0 to $15,700. |
| 12% | $11,001 to $44,725. | $22,001 to $89,450. | $11,001 to $44,725. | $15,701 to $59,850. |
| 22% | $44,726 to $95,375. | $89,451 to $190,750. | $44,726 to $95,375. | $59,851 to $95,350. |
| 24% | $95,376 to $182,100. | $190,751 to $364,200. | $95,376 to $182,100. | $95,351 to $182,100. |
| 32% | $182,101 to $231,250. | $364,201 to $462,500. | $182,101 to $231,250. | $182,101 to $231,250. |
| 35% | $231,251 to $578,125. | $462,501 to $693,750. | $231,251 to $346,875. | $231,251 to $578,100. |
| 37% | $578,126 or more. | $693,751 or more. | $346,876 or more. | $578,101 or more. |
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