Do You File Taxes When Receiving Disability Payments?

When you work as an individual for a company, your employer deducts taxes from your paycheck. Every year you receive a W-2 form telling you how much your income is taxable and the taxes you have paid for the year. Once you file your taxes, you can see how much you owe or how much the government owes you. In fact, those taxes are what make disability benefits possible.

This process fairly straightforward. However, for Social Security Disability (SSDI) recipients, it isn’t that simple. Disability payments aren’t always taxable. So, when do you file taxes when receiving disability payments? The easy answer is always. You file taxes when you have income. Here are ways to see if your benefits are taxable.

Is it Taxable?

First, it’s important to know that we are only discussing SSDI benefits. Supplemental Security Income (SSI) is a needs-based benefit, and therefore not enough income is earned for it to be taxed. According to the Social Security Administration (SSA), it is commonly marital status and income that determine whether you pay taxes on your SSDI benefits.

Your Social Security Disability benefits are not taxable if:

  • You file taxes as an individual and make less than $25,000 annually.
  • You file taxes jointly with a spouse and combined you make less than $32,000 annually.

However, if your income exceeds those amounts:

  • 50% of your benefits are taxable if you file taxes as an individual or jointly with a spouse and make less than $44,000.
  • 85% of your benefits are taxable if you file taxes as an individual or jointly with a spouse and make more than $44,000.

Withholding Taxes on Benefits

You may already know, based on your income, you will pay taxes on your SSDI. You can request that the SSA withhold taxes from your payments. This will help make sure you don’t owe or at least owe less come tax season. The SSA will not withhold automatically, so it’s important you contact them directly to make any arrangements.

It is recommended that you contact a tax professional or purchase tax prep software to assist you in filing your taxes. If you have questions about Social Security Benefits or need to file a claim, contact Disability Support Services today. We are here for you and can help you with questions like these and more. Call us at (410) 244-0006 or fill out our free evaluation online.