Be aware of possible taxes on Social Security Disability Income

On Behalf of | Nov 18, 2021 | Social Security Disability

Taxes can still be a concern for individuals in New York who receive Social Security Disability Insurance income. Many do not continue to work after being declared disabled, but some are employed in a part-time capacity. Additionally, many are married and file taxes together with their spouse. Both scenarios could potentially create a tax liability on a portion of any SSDI income in certain situations.

This depends on total income amounts after they are calculated. Deductions can matter as well depending on the type of income, such as operating a personal private business. The IRS has specific rules when it comes to taxes for disability recipients, and there could also be state tax concerns based on income level.

Individual tax liability

Single individuals who receive SSDI are not responsible for any taxes from their disability pay if their total annual income is under $25,000. For those who continue to work and receive Social Security Disability, the IRS allows SSDI income to be assessed at a 50% rate when included in the standard deduction amount. Even those who have a total income between $25,000 and $34,000 only pay taxes on 50% of their SSDI allowance. Those who exceed this limit pay on 85% of their SSDI income.

Married couple tax liability

The IRS rules differ somewhat for married couples. Income limits before tax liability applies increase to $32,000 for both spouses combined. This means that some Social Security Disability recipients may want to file an individual tax return when their spouse earns a significant annual wage. The 50% taxable amount for married couples is between $32,000 and $44,000, with those receiving over $44,000 total paying taxes on 85% of their SSDI income.

It is also important to note that lump-sum payments after a lengthy period of waiting for SSDI approval can impact taxes. However, the amount is typically divided over the number of years that the recipient waited for approval.