Do I have to pay taxes on Social Security Disability payments?

| Jul 8, 2021 | Social Security Disability

They say the only certainties in life are death and taxes. As far as taxes are concerned, most of us in San Diego want to pay as little income tax as we can without risking an audit or criminal charges.

This is especially true when you are on a limited income like Social Security Disability benefits. If you are unable to work full-time due to a physical or mental disability or illness, you likely rely on SSD and other benefits to make ends meet. The last thing you need to a big tax bill to pay.

SSD payments are taxable — sometimes

However, you should know that SSD benefits are potentially taxable, though it’s unlikely. As AARP explains, it depends on what your provisional income was for the year. Here’s what counts as provisional income for federal income tax purposes:

  • Half the value of your SSD benefits
  • Adjusted gross income
  • Tax-exempt interest income

If your total for these three figures is less than $25,000 (if you file individually) or $32,000 (if you are married and file jointly with your spouse), you won’t have to pay tax on your SSD benefits. An individual with $25,000-$34,000 will pay up to 50 percent tax on their SSD income, as will joint filers with $32,000-$44,000. And individuals with more than $34,000 in income and joint filers with more than $44,000 will pay 50-85 percent tax on their Social Security Disability benefits.

Most recipients don’t have to pay

Most people who qualify for SSD do not have to pay taxes on those benefits. Their conditions limit their ability to work more than a few hours a week, if they can work at all. In 2021, the Social Security Administration set the monthly income cap at $1,310 per month for most beneficiaries. That works out to $15,720 in gross income.