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Is Social Security disability income taxable?

Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella...

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UPDATED: Mar 19, 2020

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ss disability tax dedcutibleYes, Social Security disability income is taxable. The taxability of Social Security income is based on the total adjusted income of you and your spouse. If you go over a certain threshold, your income will be taxed.

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The amount of income also determines the amount that is taxed. The following article will provide additional information on Social Security disability income and the tax thresholds involved.

What is Social Security disability income?

Social Security disability income is income you receive from the government when you cannot work due to an illness, accident, disease, or mental illness. The disability can be permanent or temporary. You can only receive Social Security disability income if you have worked and paid into Social Security, if you were born with your disability or if your disability was diagnosed in childhood or adolescence making it impossible to ever work. Disability diagnoses must be given by a licensed physician, psychiatrist, or a psychologist.

The income you receive will be based on:

  • Your income level before the diagnoses
  • The severity of the disability
  • Other income you may have through a spouse, trust fund, savings account, etc.

Once you apply for benefits and are approved, you will have to reapply as needed so your disability can be reassessed. If there are any changes in your disability status before the renewal time, it is your responsibility to report the changes to the government.

What are the taxable income thresholds of Social Security disability income?

is ss disability taxable

Though Social Security disability benefits are readily accessible to individuals in need, they are also subject to total household income limits. This means that your spouse’s income is taken into consideration even though you are the one receiving the benefits. Also taken into consideration are your assets and any other income sources that you have.

It is important to be completely truthful about your income because if you are found to be untruthful on your application you can face jail time or be forced to repay everything you have received in SSDI

If your total combined household income is:

  • $25,000 to $34,000 you can be taxed on 50% or more of your SSDI
  • Over $34,000 you can be taxed on 85% to 100%

This amount is not very high when you consider the costs of running a household. This is especially true when children are part of the family. Because these amounts are lower, the majority of individuals who receive Social Security disability benefits pay some taxes on some or all of the income.

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How can I plan for the taxes that will be due on my Social Security disability income?

The best thing to do before receiving benefits is to consult a financial planner, tax preparer, or certified public accountant about your total household income. A professional in one of these areas will be able to tell you if your Social Security disability is taxable and how much of your Social Security disability income will be taxed. Once you have this number in mind, you can try to better prepare financially so when tax time comes, you are not surprised by the amount you have to pay.

The best way to be prepared for the money that will be due at tax time is to take the total amount that will be due, divide it by 12 and put that amount away each month in a savings account, or other income building account. When taxes are due, just withdraw the amount minus the interest and pay your taxes. The interest will be an added benefit and your money to keep. You have to be consistent in this. It is easy to not put the money away one month and then you will find yourself in a bind once the money is due.

Don’t let the fact that disability income is taxable discourage you from applying for disability income if you are truly disabled. Even after being taxed, the income can help you and your family maintain a higher quality of life. Another thing to keep in mind is consulting a tax professional about the best way to make all the deductions possible on your taxes so you can keep more of your Social Security disability income and give less back through taxes.

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