Are You One of the 1/3 Paying Taxes on Your Social Security Disability Benefits? Here’s What You Need to Know

According to a recent report, the majority of Social Security disability beneficiaries are not required to pay taxes on their benefits. However, according to a report by MARCA on February 19, 2023, roughly one-third of SSDI recipients may be subject to taxes on their benefits due to the income of their spouse or other household members.

While benefits from Supplemental Security Income (SSI) are not taxed, those who are married and file jointly with a combined income of more than $32,000 per year, including half of their SSDI benefits, may see a portion of their benefits taxed. Similarly, single SSDI recipients earning over $25,000 annually, including 50% of their benefits, may also be subject to taxes, based on a published article by Investopedia on February 7, 2023.

Calculating the amount of SSDI benefits that are subject to tax can be challenging, especially for those earning more than $2,083 per month. However, there are tools available, such as the Social Security tax calculator and IRS Form 1040.

In the case of lump-sum SSDI back payments, it’s essential to consider the impact on taxes. While such payments can increase an individual’s income for that year, it’s possible to apply SSDI benefits owed from a prior year to earlier tax returns. This can help prevent an individual from paying too much in taxes on their back pay. Additionally, it may be possible to adjust tax returns from the previous two years to claim some of the income there instead of in the current year.