Are Your Social Security Disability Insurance Benefits Taxable?

As we approach tax season, one of the most common questions we hear at The Khaki Law Firm is “Now that I have been approved for Social Security Disability (SSDI) benefits, are those benefits taxable?” For the majority (approximately 2/3) of those who are receiving SSDI benefits, the answer is no. Unlike Social Security retirement benefits, which are based upon the amount of Social Security taxes paid during your working years, many SSI (Supplemental Security Income) recipients qualify for these disability benefits on a financial need basis; he or she falls below the household income and asset threshold. Therefore, many SSDI recipients do not receive a high enough monthly income to be taxed to begin with.

However, about 1/3 of Social Security Disability benefit recipients may have to pay some taxes, because of additional household income or because of their spouse’s income. Here is how the federal income tax system may affect these SSDI recipients:

• Single: If you are single or file your taxes as an individual and your annual income is between $25,000 and $34,000, then about 50% of your SSDI benefits are taxable. If you make more than $34,000, then 85% of your benefits may be taxed.
• Married: If you are married and file jointly, then you and your spouse can have a combined income of up to $32,000 before having to pay taxes on about 50% of your benefits. If you and your spouse have a combined income of more than $44,000, then 85% of your disability benefits may be taxed.

Most states, including Georgia, do not tax Social Security disability benefits. Georgia does impose income taxes but exempts 100% of SSDI benefits from a resident’s tax liability.

Please be advised that The Khaki Law Firm does not specialize in tax law and our firm does not have accountants on staff. The above information is provided for the purpose of giving you a general idea of how SSDI benefits may be taxed. For more information about your SSDI benefits and taxes, you can visit the Social Security Tax Calculator. To best determine how your disability income will be taxed, please seek the advice of your accountant or contact us for a referral to an accountant.