Most people on SSDI pay no federal income tax on their benefits

Whether you owe federal income tax on your Social Security Disability Insurance (SSDI) depends on your total income for the year, not on SSDI alone. If SSDI is your only income, you almost certainly will not owe federal tax. If you have other income — wages, self-employment earnings, interest, dividends, or retirement account withdrawals — some of your SSDI may become taxable.

The combined income test is what the IRS uses. Combined income means your adjusted gross income plus nontaxable interest plus half of your SSDI benefits. If that number stays below a threshold that depends on your filing status, none of your SSDI is taxable. If it goes above the threshold, up to 50 percent or 85 percent of your benefits may be taxable, depending on how far above the threshold you go.

You do not pay Social Security tax (the 6.2 percent that comes out of paychecks) on SSDI, and you do not pay Medicare tax on it either. The tax question is only about federal income tax.

Key Takeaways

  • If SSDI is your only income, you owe no federal income tax on your benefits.
  • If you have other income, the IRS uses a combined income calculation to decide whether part of your SSDI becomes taxable.
  • The income thresholds are $25,000 for single filers and $32,000 for married couples filing jointly; these thresholds have not changed since 1984.
  • You can ask the Social Security Administration to withhold federal income tax from your SSDI payments if you expect to owe tax, which prevents a large bill at tax time.
  • State income tax on SSDI varies by state; some states do not tax SSDI at all, while others follow the federal rules.

How the combined income test works

The IRS starts with your adjusted gross income (AGI) — the number on line 11 of Form 1040. Then it adds back any nontaxable interest you received (usually from municipal bonds). Then it adds half of your SSDI benefits for the year. That total is your combined income.

If you are single and your combined income is $25,000 or less, none of your SSDI is taxable. If you are married filing jointly, the threshold is $32,000. If you are married filing separately, the threshold is zero — meaning any combined income at all may trigger taxation.

Once combined income exceeds the threshold, the calculation becomes more complex. Up to 50 percent of your SSDI may become taxable if combined income is between the first threshold and a second threshold ($34,000 for single filers, $44,000 for married filing jointly). If combined income exceeds the second threshold, up to 85 percent of your SSDI may become taxable. The IRS worksheet on Form 1040 or in the instructions walks through the exact calculation.

What counts as income for this test

Wages from work count. Self-employment income counts. Interest and dividends count. Distributions from retirement accounts (401k, IRA, pension) count. Rental income counts. Capital gains count. Unemployment benefits count. Taxable scholarships count.

Some things do not count: Supplemental Security Income (SSI) does not count. Veterans benefits do not count. Workers' compensation does not count. Gifts do not count. Inheritances do not count. The return of your own principal from investments does not count — only the earnings do.

If you are working and earning wages, even part-time work can push you over the threshold. A single person with $20,000 in wages and $15,000 in SSDI would have combined income of $27,500 (20,000 + 7,500), which exceeds the $25,000 threshold by $2,500. That excess triggers the taxation formula.

Withholding tax from your SSDI payments

You can ask Social Security to withhold federal income tax directly from your monthly SSDI payment. This is optional, but it prevents a surprise tax bill in April. You fill out Form W-4V (Voluntary Withholding Request) and send it to your local Social Security office or your My Social Security account online.

You choose the withholding rate: 10 percent, 12 percent, 22 percent, or 24 percent of your monthly benefit. If you expect to owe $500 in federal tax for the year and your monthly SSDI is $1,200, withholding 10 percent ($120 per month) would cover most of it. You can change your withholding rate at any time by submitting a new Form W-4V.

Withholding is not the same as paying estimated tax. If you have other income (wages, self-employment, rental income), you may also need to make quarterly estimated tax payments to avoid penalties. A tax professional can tell you whether you need to do both.

State income tax on SSDI

Thirty-eight states do not tax SSDI at all, regardless of your other income. These states are: Alabama, Alaska, Arizona, Arkansas, California, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Washington, West Virginia, Wisconsin, and Wyoming.

Twelve states do tax SSDI: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and Virginia. Most of these states follow the federal combined income test, though the thresholds and percentages vary. A few states have their own rules. If you live in one of these states, contact your state tax authority or a tax professional to understand your obligation.

If you moved during the year, you may owe tax to two states. The state where you lived on December 31 is usually the one that taxes your full-year income, but some states have different rules for people who move mid-year.

Reporting SSDI on your tax return

Social Security sends you a Form SSA-1099 by January 31 each year. This form shows the total SSDI you received in the prior year. You use this number to fill out your federal tax return (Form 1040) and any state return.

You do not report SSDI on a separate line as income. Instead, you include it in the combined income calculation described above. If none of your SSDI is taxable (because combined income is below the threshold), you still receive the Form SSA-1099, but you do not report any of it as taxable income on your return.

If part of your SSDI is taxable, you report the taxable portion on line 5b of Form 1040. The Form 1040 instructions include a worksheet to calculate the taxable amount. Many tax software programs have this worksheet built in.

What happens if you do not file a return

If you have no tax liability — meaning your income is below the filing threshold for your age and status — you are not required to file a federal return. The IRS filing thresholds are different from the SSDI combined income thresholds. For 2024, a single person age 65 or older with only SSDI income does not have to file unless their income exceeds $15,000. A married couple age 65 or older filing jointly does not have to file unless their income exceeds $30,000.

However, if you had federal income tax withheld from your SSDI (or from wages), you should file a return to claim a refund of that withholding. You may also be may have access to to the Earned Income Tax Credit (EITC) or other credits if you have wages, which requires filing a return to claim them.

Frequently Asked Questions

Can I work and still receive SSDI without losing my benefits?

Yes, but there are limits. During the trial work period (nine months in a rolling 60-month window), you can earn any amount and keep your full benefit. After that, if you earn more than the substantial gainful activity (SGA) limit — $1,550 per month in 2024 — your benefits may stop. Earnings still count toward the combined income test for tax purposes, even during the trial work period.

Do I have to pay back taxes if I did not withhold?

If you owe tax and did not withhold or pay estimated tax, you will owe the tax plus interest and possibly penalties when you file. The IRS charges interest on unpaid tax from the due date of the return. Penalties apply if you underpay by a certain amount. Withholding or making quarterly payments avoids these charges.

What if I receive back pay from Social Security?

Back pay is the lump sum Social Security pays you for months between when you became disabled and when your claim was approved. This entire amount counts as income in the year you receive it, which can push your combined income well over the threshold and make a large portion of your SSDI taxable that year. You can ask Social Security to withhold tax from the back pay, or you can make an estimated tax payment to cover the tax liability.

Does my spouse's income affect whether my SSDI is taxable?

Only if you file a joint return. If you file jointly, you combine both spouses' income plus half of both spouses' SSDI benefits. If you file separately, each spouse's SSDI is tested against that spouse's own income only, though filing separately usually results in more tax overall.

What if I disagree with the tax calculation on my Form SSA-1099?

Contact Social Security directly to verify the amount shown. Errors on the form are rare but do happen. Social Security can issue a corrected Form SSA-1099 (Form SSA-1099-R) if the original was wrong. Keep a copy of the corrected form with your tax records.