Do you have to pay taxes on ssdi

Social Security disability benefits are taxable, but you may not owe taxes on them if you have less income than the set thresholds. If you’re worried about how receiving disability benefits while reporting other income might affect your tax bill, talking to a tax professional can help. They may be able to come up with strategies or solutions to minimize the amount of taxes you’ll end up owing.

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.

Regarding social security disability tax consequences, if you’re required to file an individual income tax return, Social security disability income (SSDI) is taxed the same as other social security benefits.

None of your SSDI is taxable if half of your SSDI plus all your other income is less than:

• $25,000 if filing single, head of household, or married filing separately (if you and your spouse lived apart at all times during the year)
• $32,000 if married filing jointly
• $0 if married filing separately (if you and your spouse lived together at any time during the year)

Special Rules Around SSDI Tax Consequences

However, if half of your SSDI plus all other income is more than the amounts above, part of your benefits may be taxable.

Amount of Income Tax on Social Security Benefits

The amount of income tax on social security benefits depends on the total amount of your benefits and other income. Usually, the higher that total amount, the greater the taxable part of your benefits.

If a portion of your benefits is taxable, usually 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of these situations applies:

• The total of half of your benefits and all your other income is more than $34,000 — or $44,000 if married filing jointly.
• You’re married filing separately and lived with your spouse at any time during the tax year.

Use Worksheet 1 in Publication 915 to figure the taxable portion of your SSDI benefits.

Where to Go for More Help with Social Security Disability Income Tax Consequences

There’s a lot to take in where social security disability income is concerned. If you need help understanding your options, our knowledgeable tax pros can help.

Make an appointment to speak with one of our tax pros today.

Need more options? Discover the many ways to file your taxes with H&R Block.

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