Are Your Social Security and SSI Disability Benefits Taxable?
Tax time is quickly approaching…and you might be wondering if your Social Security or SSI benefits count as taxable income.
SSI benefits are simply not taxable. SSI is an entitlement or welfare program. The minimum benefits paid to a claimant are tax-free. Remember that a claimant must have assets under $2000 to be eligible for SSI in the first place.
Social Security (SSDI) benefits, paid based on someone’s work record, may be taxable. If the only income for a claimant and spouse is SSDI, the benefits will not be taxable and there is probably no necessity of filing a tax return. If there is any other income, then a portion of the SSDI benefits may be subject to tax liability.
As a general rule, no one pays federal income tax on more than 85% of Social Security benefits.
1. If you file a federal tax return as an “individual” and your combined income is:
- between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $34,000, up to 85 percent of your benefits may be taxable.
2. If you file a joint return, and you and your spouse have a combined income that is:
- between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
- more than $44,000, up to 85 percent of your benefits may be taxable
- are married and file a separate tax return, you probably will pay taxes on your benefits.
The retroactive lump sum back benefit checks are important to consider. If the back benefit covers a number of years of disability, there are tax benefits from counting it in different years. There is a method of counting half of the back benefit amount as if it had been paid in earlier years, which in many cases will eliminate tax liability for the current year.
Your attorney fee may be deductable. Consult a tax professional to be sure you are paying the correct amount, maximizing your deductions.
Consult these sources for further information:
- NOSSCR Social Security and Income Tax – Information from the professional association of Social Security Disability Attorneys
- IRS Publication 915 – This booklet contains information and examples of how to file your returns if you receive benefits
- Are Your Social Security Benefits Taxable? – This page gives general information on whether or not your benefits are taxable.
This information is general and not intended as professional tax advice. Consult your tax professional for guidance.