Do you file taxes on ssi income

There is a saying that the only two things in life that are certain are death and taxes. As United States citizens, we are well aware of the fact that we pay taxes on the income we receive. In fact, a part of those taxes is what makes it possible for disabled workers to obtain Social Security Disability benefits. The question is, do Social Security Disability beneficiaries have to file taxes when receiving disability benefits and do they have to pay taxes on the Social Security Disability benefits that they receive?

Whether or not you actually have to file taxes when receiving Social Security Disability depends on how much income you receive and whether or not your spouse receives an income. If Social Security Disability benefits are your only source of income and you are single, you do not necessarily have to file taxes. Doing so, however, may be in your best interests – such as the case with stimulus payments that you may not receive if you do not file taxes.

The general rule of thumb to follow is that you will have to pay federal taxes on your Social Security Disability benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total combined income that exceeds $32,000.

The good news is that you will not have to pay taxes on all of the Social Security Disability benefits that you receive if you do fall within one of the above tax brackets. If you file a federal tax return as an individual and earn between $25,000 and $34,000 for the year, you may be responsible for paying income tax on 50 percent of the amount you received from the Social Security Administration (SSA). If your income is more than $34,000, then you may have to pay taxes on up to 85 percent of your Social Security Disability benefits.

If you file jointly with your spouse, you may have to pay taxes on 50 percent of your Social Security Disability benefits if you and your spouse have a combined income of between $32,000 and $44,000. If you and your spouse have a combined income of more than $44,000, then up to 85 percent of your Social Security Disability income may be taxed. The good news is that you will never have to pay taxes on more than 85 percent of your Social Security Disability earnings.

It is in your best interests to file jointly with your spouse. If you file as married filing separately, you will likely have to pay taxes on some portion of your Social Security Disability payments.

The SSA is not obligated to withhold taxes from your Social Security Disability payments. If, however, you feel that you are going to owe taxes on your Social Security Disability benefits you can contact the SSA and ask them to withhold taxes for you if you prefer your tax situation be handled through tax withholding. In order to do this, you will need to contact your local Social Security Office in order to set up tax withholding arrangements.

Taxes on disability income.

In the U.S., if you work long enough, pay your taxes, and meet certain income thresholds during your career, you can participate in Social Security programs. Over time, you pay into this system and can expect to receive several benefits for you and your family.

If you work but later become disabled and have limited resources and means to earn income, the Social Security Disability Insurance program can assist. The program pays benefits to you and your children. But because your taxes fund this program, you may wonder — is Social Security disability income taxable? Let's find out.

What is Social Security Disability Insurance?

Social Security Disability Insurance (SSDI) is a social insurance program funded by payroll taxes meant to help you if you become disabled. The program's administrator, the Social Security Administration (SSA), generally allows you to earn coverage benefits if you meet their definition of disabled and are unable to work for a year or more.

The Social Security Disability Insurance program provides modest — though vital — benefits to you if you have suffered a serious and long-lasting medical condition that meets Social Security's strict definition of disability. As a result, you can receive benefits if you meet the eligibility requirements.

Who's eligible for Social Security Disability Insurance?

In addition to meeting the disability requirements, you must have worked long enough and recently enough to qualify for Social Security Disability Insurance.

First, you must meet the work test. This test is based on Social Security work credits and requires you to earn at least a minimum amount of income in wages or self-employment income per calendar year. For each $1,510 (2022 amount) in wages or self-employment income that you earn per year you earn one credit. You can earn up to four credit per year.  When you've earned $6,040 in 2022, you've earned your four credits for 2022.

Typically, you need at least 40 credits with 20 of these earned in the last 10 year period ending with the year of your disability. However, meeting the work test requirement can also depend on your age. It requires different amounts of Social Security credits since younger workers typically have not had enough time in the workforce to earn the full 40 credits. For those:

• Under age 24: You meet the work test if you earned 6 credits in the 3-year period when your disability began.
• Age 24 to 31: In general, you may qualify if you have credits equivalent to working half the time between age 21 and becoming disabled.
• Age 31 or older: You'll need to have earned at least 20 credits in the 10-year period immediately before becoming disabled.

Second, review the Social Security Administration's table to determine if you meet the duration of work test based on your age and when your disability began.

Third, you must be unable to work because of a medical condition that has lasted a year, is expected to last at least one year, or is expected to result in death. This means not having a partial disability and meeting the Social Security Administration's definition of disabled.

Fourth, you must be younger than your full retirement age as defined by Social Security.

If you meet the requirements above and qualify for Social Security Disability Insurance, certain members of your family may also receive benefits based on your work history.

What benefits does Social Security Disability Insurance offer?

The amount you receive from Social Security Disability Insurance depends on your average lifetime earnings before your disability began. Generally, the more you earned over a longer period, the more you'll benefit, up to a maximum amount. The Social Security Administration calculates your disability benefit based on the amount of your Social Security "covered earnings." Generally, these are your past earnings that have been subject to Social Security tax.

Your benefits are determined by averaging your covered earning over the 35-year period representing your top earning years. The SSA sees this as your average indexed monthly earnings (AIME). The SSA then applies a formula to your AIME to calculate your primary insurance amount (PIA). This serves as the base figure for the SSA to calculate your Social Security Disability Insurance benefit amount.

To understand your entire covered earnings history, the SSA provides access to your annual Social Security Statement. If you receive other disability benefits from private insurers, this will not impact your Social Security Disability Insurance benefits.

Receiving benefits from other government-sponsored programs may affect your Social Security Disability Insurance benefits. These can be programs such as workers' compensation or a temporary state disability program. Generally, Veterans Affairs (VA) and Supplemental Security Income (SSI) will not reduce your Social Security Disability Insurance benefit. However, getting Social Security Disability Insurance may reduce your Supplemental Security Income.

The Social Security Disability Insurance program rules limit your overall benefit under certain conditions. The combination of Social Security Disability Insurance and other government-sponsored disability programs cannot be more than 80% of the average amount earned before you became disabled. If this happens, the SSA will reduce your payments.

Is Social Security disability taxable?

You may need to pay taxes on your Social Security Disability Insurance benefits. This can happen if you receive other income that places you above a certain threshold. But, because SSDI requires you to be disabled and have limited income to be eligible, you might not have other income to exceed this threshold.

Common examples for when your Social Security Disability Insurance benefits may be taxable are if you receive income from other sources, such as dividends or tax-exempt interest, or if your spouse earns income. If this describes your situation, you will need to know the thresholds for when your SSDI becomes taxable.

The IRS states that your SSDI benefits may become taxable when one-half of your benefits, plus all other income, exceeds an income threshold based on your tax filing status:

• Single, head of household, qualifying widow(er), and married filing separately  (did not live with spouse) taxpayers: $25,000
• Married filing jointly: $32,000
• Married filing separately but lived with your spouse at any time during the tax year: $0

For example, if you are married and file jointly, you can report up to $32,000 of income (made up of half of your SSDI benefits plus all of your other income) before needing to pay taxes on your SSDI benefits. If you earn more than these limits for these tax filing statuses, you have two different benefit inclusion rates that can apply.

For 2022:

• As a single filer, you may need to include up to 50% of your benefits in your taxable income if your income falls between $25,000 and $34,000.
• Up to 85% gets included on your tax return if your income exceeds $34,000.

For married couples who file jointly, you'd pay taxes:

• Up to 50% of the Social Security Disability Insurance benefits you receive when your combined income falls between $32,000 and $44,000
• Up to 85% of your disability benefits if your combined income exceeds $44,000

What is Supplemental Security Income?

Social Security Disability Insurance benefits and SSI benefits differ based on who receives them and why. SSI recipients do not need to meet the same disability or work credit requirements like those who receive Social Security Disability Insurance benefits.

Generally, SSI payments go to the elderly, blind, or disabled. Also, SSI benefit recipients often qualify for Medicaid assistance automatically.

Let an expert do your taxes for you, start to finish with TurboTax Live Full Service. Or you can get your taxes done right, with experts by your side with TurboTax Live Assisted. File your own taxes with confidence using TurboTax. Just answer simple questions, and we’ll guide you through filing your taxes with confidence. Whichever way you choose, get your maximum refund guaranteed.