Is Social Security Disability Taxable?
Social Security Disability Insurance (SSDI) benefits may be taxable at both the federal and state level depending on your income, age and marital status. If you gain a lump sum payment for SSDI back pay, you may owe taxes on that money. However, most people on SSDI don’t meet the taxable thresholds.
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- Published: March 3, 2023
- Updated: July 10, 2023
- 6 min read time
- This page features 9 Cited Research Articles
- Edited By
- Up to 85% of your SSDI benefits may be taxable at the federal level depending on your living arrangements and how much income you receive from other sources.
- While most states don’t count SSDI benefits as taxable income, some states tax a portion of total benefits for people with higher incomes.
- You must pay taxes on SSDI back pay for the year in which you receive the money. However, you can figure the taxable portion of your back pay for an earlier year, separately, if doing so reduces your tax burden.
How Much of Your Social Security Benefit Is Taxed?
Depending on your combined income and marital status, up to 85% of your Social Security Disability Insurance benefits may be taxed by the U.S. government. You may owe additional state taxes on your benefits depending on where you live.
SSDI benefits are disability payments administered by the Social Security system. While the similar Supplemental Security Income (SSI) program offers modest, tax-free benefits to people with disabilities in need, SSDI benefits are different because they may be taxable.
SSDI taxation thresholds are based on your combined income, not your total income. To determine your combined income, calculate half of all SSDI benefits you received in any year. Then add your gross income from other sources in that same year, plus any non-taxable interest you received.
Social Security Disability Insurance Tax Rules for Individuals
If you are not married, your SSDI payments will be taxed as follows.
|Between $25,000 and $34,000
|up to 50%
|More than $34,000
|up to 85%
This type of tax typically applies if you have other substantial income aside from your benefits, such as wages, dividends, self-employment or other taxable income.
Social Security Disability Insurance Tax Rules for Married Couples
SSDI tax rules differ for married couples who file joint tax returns. Their income thresholds are higher, so they can earn — or receive — more money without owing taxes on their SSDI payments. However, the tax thresholds consider the combined income of both spouses.
If you are married, your SSDI payments will be taxed as follows.
|Combined Income of Both Spouses
|Between $32,000 and $44,000
|up to 50%
|More than $44,000
|up to 85%
If you’re married and lived with your spouse at any point during the year but file your taxes separately, you’ll owe taxes on 85% of your SSDI payments regardless of your combined income.
Social Security Disability Insurance Taxation by State
Most states don’t tax SSDI benefits. The states that do, tax them according to their own regulations.
- People ages 65 or older pay no state tax on SSDI benefits. People ages 55 to 64 can receive up to $20,000 in benefits tax-free. All other SSDI recipients pay tax on the full amount.
- Single SSDI recipients with an adjusted gross income of less than $75,000 or married couples with an AGI of less than $100,000 pay no state tax on their SSDI benefits. People with income above those thresholds pay state tax on 75% of their benefits.
- SSDI recipients with an AGI of less than $75,000 pay no state tax on their benefits. People with higher incomes pay state taxes on all their benefits.
- SSDI recipients pay state tax according to the same rules that govern federal SSDI taxes. A partial deduction of up to $4,260 for single people or up to $5,450 for married people is available for people with lower incomes.
- Single people with an AGI of less than $85,000 and married people with an AGI of less than $100,000 pay no tax on SSDI benefits if they are 62 or older. Those who earn more may receive a partial deduction.
- People with an AGI of less than $25,000 (if single) or $32,000 (if married) pay no tax on their SSDI benefits. People with incomes above these thresholds should fill out a state tax worksheet to determine how much they owe.
- Single people with an AGI of less than $43,000 and married people with an AGI of less than $58,000 pay no tax on SSDI benefits. Those who earn more pay tax on a portion of their benefits. That percentage will shrink over the next several years before all SSDI benefits become non-taxable in 2025.
- North Dakota
- Single people with an AGI of less than $50,000 and married people with an AGI of less than $100,000 pay no tax on their SSDI benefits.
- New Mexico
- Single people with an AGI of less than $100,000, married people filing jointly with an AGI of less than $150,000 and married people filing individually with an AGI of less than $75,000 all pay no tax on SSDI benefits.
- Rhode Island
- Single people with an AGI of less than $95,800 and married people with an AGI of less than $119,750 pay no tax on their SSDI benefits if they have reached full retirement age as defined by Social Security Administration.
- Single people with an AGI of less than $30,000 and married people with an AGI of less than $50,000 gain tax credits that fully offset the state tax on their SSDI benefits. These credits phase out at a rate of 2.5 cents per dollar for income above these thresholds.
- Single people with an AGI of less than $34,000 and married people with an AGI of less than $44,000 can deduct a portion of their SSDI benefits from their taxable income.
How Can Back Pay Affect Taxes on My Social Security Disability Benefit?
If the government doesn’t approve your SSDI application immediately, you may receive back pay for the months that have passed since your initial application. Back pay gets awarded as one lump-sum payment alongside your usual monthly payments.
You also have the option to figure out the taxable portion of your lump-sum payment for an earlier year separately. This may help you reduce your taxable income for the current year.
- Add the lump sum payment for that year to your previously reported income, including any Social Security benefits you received.
- Recalculate the taxable portion of your benefits for that year using your new figures.
- Subtract any benefits you previously reported that year.
- Add the rest to the taxable portion of your benefits for the current year.
Any back pay you receive you must be included in your tax returns for the year you received it. You can’t amend your tax returns for previous years to include these payments.
9 Cited Research Articles
- Rhode Island Department of Revenue Division of Taxation. (2023, January 20). Inflation-adjusted amounts set for tax year 2023. Retrieved from https://tax.ri.gov/sites/g/files/xkgbur541/files/2023-01/ADV_2022_40_Inflation_Adjustments_revised_1-20-23.pdf
- Rae, D. (2022, March 22). Will Your State Be Taxing Your Social Security Benefits? Retrieved from https://www.forbes.com/sites/davidrae/2022/03/22/will-your-state-be-taxing-your-social-security-benefits/
- Fritts, J. (2021, May 26). How Does Your State Treat Social Security Income? Retrieved from https://taxfoundation.org/states-that-tax-social-security-benefits-2021/
- Center on Budget and Policy Priorities. (2021, February 12). Chart Book: Social Security Disability Insurance. Retrieved from https://www.cbpp.org/research/social-security/social-security-disability-insurance-0
- Cammenga, J. (2021, February 6). 37 States Don’t Tax Your Social Security Benefits — Make That 38 in 2022. Retrieved from https://www.marketwatch.com/story/37-states-dont-tax-your-social-security-benefits-make-that-38-in-2022-11612453620
- Social Security Administration. (n.d.). Income Taxes and Your Social Security Benefit. Retrieved from https://www.ssa.gov/benefits/retirement/planner/taxes.html
- Internal Revenue Service. (n.d.). Frequently Asked Questions: Back Payments. Retrieved from https://www.irs.gov/faqs/social-security-income/back-payments/back-payments
- Internal Revenue Service. (n.d.). Frequently Asked Questions: Regular & Disability Benefits. Retrieved from https://www.irs.gov/faqs/social-security-income/regular-disability-benefits/regular-disability-benefits
- Taxation & Revenue New Mexico. (n.d.). Gov. Michelle Lujan Grisham Eliminates Tax on Social Security. Retrieved from https://www.tax.newmexico.gov/social-security-income-tax-exemption/