How Much Tax Do I Have to Pay on Social Security Disability (2017)?
The holidays are almost behind us, 2018 is upon us – and thoughts turn to filing taxes for the past year. As the Long Beach area’s experts in Social Security Disability, our client’s often ask us if their Social Security Disability Benefits will be taxed.
Whether you are taxed on your Social Security Disability Income will depend upon your total income from all sources. In this article we discuss the general rules for taxing Social Security Disability Income. However, you should always discuss your tax situation with your Social Security Disability lawyer or your accountant, to understand how these rules apply to your situation.
Social Security Disability benefits (SSDI) are subject to tax – but most individual do not end up paying taxes on SSDI because they don’t have enough total income to be taxable. In other words, while SSDI is taxable, you are only taxed if your total income is high enough.
Federal Tax on Social Security Disability
Approximately one third of Social Security disability recipients do pay some taxes – usually because their spouse’s income or other household income puts them in a higher taxable bracket.
All Social Security benefits are taxed in the same way, including Social Security Disability benefits, Social Security retirement benefits and Social Security survivors benefits.
Taxes on SSD if Married and Filing Jointly
None of your Social Security Disability Income (SSDI) is taxable if half of your SSDI plus all your other income is less than$32,000, if you’re married filing jointly.
Up to 50% of your SSDI is taxable if your income is more than $32,000.
Up to 85% of your SSDI is taxable if half of your SSDI plus all your other income is more than $44,000 if you’re married filing jointly.
Taxes on SSD if Filing Singly
None of your Social Security disability income (SSDI) is taxable if half of your SSDI plus all your other income is less than $25,000 if you filed as:
- head of household, or
- married filing separately, and you and your spouse lived apart all year
Up to 50% of your SSDI is taxable if your income is more than $25,000.
Up to 85% of your SSDI is taxable if half of your SSDI plus all your other income is more than $34,000.
State Tax on Social Security Disability
Most states – including California – do NOT tax Social Security disability benefits.
However, the following states DO tax Social Security disability benefit: Colorado, Connecticut, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Rhode Island, Utah, Vermont, and West Virginia. Of these states, some use the same income brackets as the IRS to tax SSDI benefits, but others have their own tax amounts.
Taxes on Social Security Disability Backpay
Lump sum payments of SSD benefits are often made for the months when you were disabled but not yet approved for benefits. Keep in mind that such a lump-sum back payment can increase your total income for the year in which you receive it – which can result in you having to pay a larger amount of taxes than you would if the payments were spread out over time.
To avoid being unfairly taxed on your backpay this way, you are allowed to apply the benefits owed from a prior year to prior tax returns. This lowers your income for the year in which you receive the lump sum.
As you can see – it is not always a clear-cut as to whether you will be taxed on your social Security Disability benefits. For this reason it is important to have an experienced Social Security Disability lawyer help you structure your benefits to ensure that you are not unfairly taxed on your benefits.
If you are considering filing for Social Security Disability, our experienced lawyers will offer you a free consultation to answer your questions and make sure your rights are protected.