How Much Tax Do I Have to Pay on Social Security Disability (Tax Year 2018)?
April 15th is fast approaching. And as the Long Beach area’s experts in Social Security Disability, our clients often ask our attorneys if their Social Security Disability Benefits will be taxed.
Whether or not 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 taxation of Social Security Disability Income.
However, you should always discuss your unique tax situation with your Social Security Disability attorney or your accountant, to understand how these rules apply to your situation. (This article is provided as general information only and is not intended as specific tax advice in your situation.)
Social Security Disability Payments MAy Be Taxable
The short answer to your question is yes, maybe. Your Social Security Disability is taxable, but only if your total income is high enough. Most individuals don’t have a high enough income to reach this threshold, so they do not end up paying taxes on SSDI. About one third of SSDI recipients do end up paying some taxes, generally because their spouse’s income or other household income puts them in a higher tax bracket.
All Social Security benefits, including Social Security Disability benefits, Social Security Retirement benefits and Social Security Survivor benefits are taxed in the same way.
Taxes on Social Security Disability if Married & Filing Jointly
Calculating the taxable amount of SSD is confusing, to be sure. Generally speaking, however, if you are married and filing jointly, and half of your SSDI plus all of your combined income is less than $32,000, then none of your SSDI is taxable. If your SSDI plus your other income exceeds $32,000, then up to 50% of your SSDI is taxable; and if your SSDI plus your other income exceeds $44,000, then up to 85% of your SSDI is taxable.
Taxes on Social Security Disability if Filing Singly
If half of your SSDI plus all your other income is less than $25,000, none of your Social Security disability income is taxable if you filed as single, head of household or married, filing separately (and you and your spouse lived apart for the entire year). If half of your SSDI plus all of your other income is more than $25,000, then up to 50% of your SSDI is taxable; and if half of your SSDI plus all of your other income is more than $34,000, then up to 85% of your SSDI is taxable.
State Tax on Social Security Disability
Most states – including California – do NOT tax Social Security disability benefits. However, if you live in Colorado, Connecticut, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Rhode Island, Utah, Vermont, and West Virginia, you will be taxed at the state level, which varies.
Taxes on Social Security Disability Back Pay
When you become disabled, it may take a while for SSD payments to begin. Your first check may be a lump sum payment, combining the amounts owed to you for the months when you were disabled but not yet approved for benefits. If the lump sum payment is made at the beginning of a year, but covers a time period from the previous year, it may increase your total income for the year in which you receive it. This can result in a larger tax burden than you would have had if the payments had been spread out over time.
If you find yourself in this position, note that it is possible to apply the benefits owed from a prior year to prior tax returns. This has the effect of lowering your income for the year in which you received the lump sum payment. An experienced Social Security Disability lawyer can help you structure your benefits to ensure that you are not unfairly taxed on your benefits.
If you are already collecting Social Security disability or you are about to apply for it, our experienced Social Security disability lawyers are happy to show you what taxes you will pay, or answer any other questions you may have. Call our attorneys today for a free, confidential, no-obligation consultation.
Long Beach Social Security Attorneys
If you or a loved one is unable to work due to a disabling injury, medical condition or disease our skilled and experienced attorneys are here to help you get the maximum Social Security Disability benefits for which you qualify.
The Law Office of Cantrell Green is a group of highly qualified and experienced disability attorneys who have obtained millions of dollars in Social Security Disability benefits for thousands of clients in Long Beach, Orange County and the greater Los Angeles. Our attorneys care about every client, and fight tirelessly to obtain the benefits you deserve.
Free Social Security Disability Attorney Consultation: 800-964-8047