Tax Considerations When Receiving SSDI

Social Security Disability Insurance benefits provide disabled workers a source of income when there is no access to other revenue sources. However, SSDI benefits are subject to taxation. The government supplies recipients with a Form SSA-1099 documenting the amount of benefits received.

It doesn’t take much in income for individuals or couples to be subject to taxation. The combined taxable income base amounts for taxes to kick in are $32,000 for married couples filing jointly and $25,000 for other filing statuses (with one notable exception). Those who are married and filing separately who lived with the spouse at any time during the tax year will face taxation for all of their SSDI benefits.

There are complicated formulas determining just how much of the benefits received above the base status will be taxed. Calculating the amount taxed usually involves filling out a number of worksheets to determine the exact amount. It’s generally best to speak to professionals who have an in depth understanding of the benefits to avoid making certain mistakes.

As we’ve said often on this website, the disability benefits received are often minimal. No one is getting rich off of receiving SSDI. However, SSDI provides monetary benefits for individuals who are unable to work due to illness or disability. The individuals receiving these benefits often are responsible for supporting families as well. These benefits allow them to remain in their home and put food on the table.

Since SSDI plays such an important role, it’s important to make certain one is eligible for the benefits. It’s also important that there is a correct filling out of the application to avoid rejection of benefits. Finally, it’s equally important to understand the exact nature of amounts of SSDI received after taxation and other costs occur.

Source: Fox Business, “Taxation of Social Security and SSDI Payments,” March 25, 2015