Are My Social Security Disability Benefits Taxable?

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Are My Social Security Disability Benefits Taxable?

If you have additional income that exceeds a specific level, your Social Security disability payments may be taxed. However, since most persons who fulfill the tight eligibility standards for the program have little or no supplemental income, the majority of people who receive Social Security benefits do not have to pay taxes on their payments.

Key Takeaways

  • Many Americans depend on Social Security Disability Income (SSDI) payments to supplement their income.
  • If your total income, including SSDI payments, exceeds the IRS criteria, the excess is liable to federal income tax.
  • The majority of states do not tax SSDI payments, but 13 do (to varying degrees).

How Social Security Disability Works

President Franklin D. Roosevelt included the Social Security program in his 1930s New Deal government reforms. The New Deal’s goal was to get the nation out of the Great Depression and rebuild its economy. Social Security was created to offer a financial safety net for seniors and others with qualifying disabilities.

The majority of persons who get Social Security disability payments are in the first group. They have attained the minimum retirement age of 62 and have applied to receive monthly benefits based on the money they contributed to the system during their working years.

People who get Social Security payments owing to a handicap are not need to reach a certain age (although they do need to have paid into the Social Security system while they were working).Instead, their impairment must match the Social Security Administration’s stringent requirements (SSA).

For starters, the SSA requires that “your disability seriously impair your ability to perform fundamental labor such as lifting, standing, walking, sitting, and remembering—for at least 12 months.” The condition must prohibit you from performing the kind of job you previously performed, and you are unable to undertake alternative employment due to your age, education, experience, and transferable skills.

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Furthermore, you must not presently be working or work so little that your monthly income is less than $1,310 in 2021 ($1,350 in 2022). The precise kind of impairment must be on the SSA’s authorized list or be deemed to be of equivalent severity to one on the list.

When Disability Benefits Are Taxed

The taxability of Social Security disability payments is determined by your total income. You will avoid paying taxes if your total income (calculated by adding one-half of your disability payments to all other sources of income, including tax-exempt interest) is less than the IRS threshold (IRS).If you are single, the current threshold amount is $25,000. It is $32,000 if you are married and file jointly.

State Taxes on Disability Benefits

Most states do not tax Social Security payments, including disability benefits. However, as of 2020, 13 states provide some kind of tax relief. Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia are among those states. The majority of these states utilize income criteria similar to those used by the IRS to determine how much, if any, of your disability payments are taxable.

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