Ask the Attorney: Is Social Security Disability Taxable?

Long Beach Attorneys Explain:
Paying Taxes on Social Security Disability

Tax day is just around the corner, and our clients often are left wondering whether they will be taxed on their Social Security Disability payments.

Social Security Disability payments are generally not taxed. But there are some exceptions – that could result in you owing taxes on up to 85% of your Social Security benefits.

Whether you have to pay taxes on your Social Security Disability will depend upon the amount of alternate income that you have, and your filing status.

If you receive Security Disability Insurance (SSDI) income, the government will send you a Form SSA-1099. Your SSA-1099 only tells you the total amount of Social Security benefits you received that year, but it but does not indicate how much (if any) of your benefits are taxable.

Estimating the Tax on Social Security Disability Benefits

You can get a reasonable estimate of the tax on your Social Security Disability Benefits by following these three steps:

  • Combine half of your Social Security benefits with all other income (including tax-exempt interest);
  • Comparing the total to the base amounts that are excluded from tax (listed below);
  • Anything over the base amount may be taxable.

Base amounts of Social Security Disability that are not taxable:

  • $32,000 if married filing jointly; or,
  • $25,000 for all other filing statuses; except
  • If your status is married filing separately and you lived with your spouse at any time during the tax year, all of your SSA/SSDI benefits are taxable.

Three Sources of Income for Tax Purposes

There are 3 source of income to consider. Notice 703 is a worksheet that is included with your SSA-1099 form. It can guide you through calculating all three sources of income:

(1.) SSA and Social Security Disability Benefits

This includes your spouse’s if they also receives benefits and you file jointly. One-half of that total serves as your income for these calculations.

(2.) Taxable Income

This includes other sources of income as listed on your Form 1040: taxable pensions, wages, dividends, and interest. (But does not include non-taxable portions of pensions and annuities and tax-exempt interest).

(3.) Tax-Exempt Interest and Exclusions

This includes tax-exempt interest in Form 1040, line 8b (such as interest from U.S. Savings Bonds) and various exclusions, like foreign-earned income.

The total of these three basically constitutes your adjusted gross income (AGI) based on your SSA/SSDI benefits.

None of your Social Security Disability benefits are taxable if the total of these three is smaller than the base value for your filing status (above). But if the result is higher, some of the amount over your base status will be taxable.

Next you need to perform another calculation to determine whether the max of 85% of your benefits – or a lesser amount – will be taxed. If filing jointly, you and your spouse’s combined income must be $32,000 or below to avoid taxes. If your income is between $32,000 and $44,000, you may be subject to taxes on up to 50% of your benefits. If your income is greater than $44,000, up to 85% of your benefits may be taxable.

Our Long Beach Social Security Attorneys Can Help

Sound complicated? It is. But if you prepare your taxes online, the software should walk you through these steps and calculations. Better yet, if you use a tax preparer or accountant, they will be able to do these calculations, and tell you what (if anything) you may owe in taxes on your Social Security Disability Benefits.

Call Our Long Beach Social Security Attorneys: 562-622-4800

Long Beach Social Security attorneys serving Los Angeles, Orange County & Southern California, including: Anaheim, Carson, Bellflower, Compton, Downey, Fullerton, Garden Grove, Huntington Beach, La Habra, La Mirada, Lakewood, Lomita, San Pedro, Santa Ana, Torrance, Wilmington, Whittier and Yorba Linda.