A common concern that individuals have ahead of applying for Social Security Disability (SSD) is the tax implications they may face. While most SSD recipients won’t owe any taxes on the monthly stipend they receive, there are some exceptions to this rule.
When do you have to pay taxes on the SSD you receive?
Current Internal Revenue Service (IRS) tax codes allow the government to tax your disability benefits whenever the sum total of your taxable income exceeds a certain threshold.
These taxation thresholds currently range from $25,000 for a single, head of household or widow(er) or married filing separately, provided that you and your spouse have been living apart for at least a year. It’s $32,000 for those who have a married filing jointly status. The income threshold drops to zero if you classify yourself as married, filing separately, and you reside with your spouse for any duration during the current tax year.
How much can you expect the IRS to tax you?
The IRS will base the tax rate it assesses you on two factors: Your filing status and the income you report.
Married taxpayers filing joint returns can expect to pay tax on 50% of the SSD benefits they receive if their combined household income falls between $32,000 and $44,000. They can expect up to 85% of their benefit to be taxable when their annual earnings exceed $44,000.
Singles who file individual returns can expect the IRS to tax 50% of their SSD benefits if they have income of between $25,000 and $34,000. Anyone who receives disability benefits and earns more than $34,000 per year in taxable income may have to pay taxes on as much as 85% of the SSD that they receive.
Where to turn for questions about SSD
Making sense of whether you qualify for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits often isn’t easy for individuals to sort out. An experienced Social Security Disability (SSD) attorney should be able to help you figure out what benefits you qualify to receive and help you obtain them.