Who needs to pay taxes on SSDI payments & how much?

[dkatya]

I've recently become disabled and now receive SSDI. My benefits are not income-dependent. I have found a lot of information saying that most people receiving disability do not need to have federal taxes withheld, but some do. I can find virtually no information on how to tell which group I'm in.

Also, Social Security requires me to write in a specific percentage on the form to request withholding, rather than simply checking a box. So not only do I not know if I need to have federal taxes withheld or not, I also have no idea what withholding rate to request. I'm on a fixed income now and don't have the resources to survive if I am caught off guard by a large, unexpected tax liability.  I also can't imagine that I am the only person in the country who doesn't have the answers!

So, would you help us out? How does one know what their responsibility is in this case? 

[drc845443]

Hello dkatya!

Whether you pay tax on your SSDI depends on your total income , both from your SSDI and other sources.

Here are two resources that you can use to determine how much of your SSDI will be subject to income tax:

https://turbotax.intuit.com/tax-tips/disability/is-social-security-disability-taxable/L5fPDpT4P

https://www.irs.gov/faqs/social-security-income/regular-disability-benefits/regular-disability-benef...

The exact percentage withholding to provide to the SSA will depend on your tax bracket, once you have calculated your estimated taxable income.

[ConnieCRA]

You may need to pay taxes on your Social Security Disability Insurance benefits. This can happen if you receive other income such as dividends or tax-exempt interest, or if you have a spouse that has income that can places you above a certain threshold. Since Social Security Disability Insurance requires you to be disabled and have limited income to be eligible, you might not have other income to exceed this threshold.  Therefore, you might not have to pay taxes on it.

To determine if you need to pay taxes on your SSDI will depend on your filing status and other souces of income. The IRS states that your Social Security Disability Insurance benefits may become taxable when one-half of your benefits, plus all other income, exceeds an income threshold based on your tax filing status:

The link below will give you further guidance on this topic:

https://www.irs.gov/pub/irs-pdf/p915.pdf

[Critter-3]

SSI (Supplemental Security Income) is frequently confused with SSDI (Social Security Disability Income). SSI is welfare and is never taxable. SSDI is treated just like Social Security Retirement Income: i.e. it may become partially taxable only when added to your other income. 

Most (almost all) SSDI recipients do not normally need to file a tax return nor get any benefit from doing so.  If SSDI is your ONLY income then you do not need to file a tax return unless you have health insurance thru the ACA Marketplace and will not owe any income taxes. 

[NitaK EA]

Hello @dkatya ,

Thank you for being a part of ’Ask the Expert' Event!

Who needs to pay taxes on SSDI payments & how much?

Whether or not your Social Security income is taxable depends on your total income, including your Social Security plus any other income. Generally speaking, if your only income is Social Security, you probably don't make enough money to be required to file a federal tax return.’

If you earn between $25,000 and $34,000 per year as a single filer (or $32,000 to $44,000 if you’re married filing jointly), you will pay income taxes on up to 50% of your Social Security benefits. If you earn more than $34,000 (or $44,000 if you’re married filing jointly), you’ll pay taxes on up to 85% of your benefits. You will never be taxed on more than 85% of your Social Security benefits.

Withholding for Social Security is voluntary (W-4V) in which you can select to have 7, 10, 12 or 22 percent taxed on your monthly benefits. How much or which percentage to select, I am going to include a link to one of our tax calculators that will assist you in estimating your tax situation.

Here are some links for you to view regarding your situation:

Is my Social Security income taxable?

Determining Who Is Taxed

TaxCaster Tax Calculator

NitaK, EA