Is Social Security Disability Taxable?
Jan. 2, 2022
You are probably somewhat familiar with the retirement benefits the U.S. Social Security Administration (SSA) provides once you reach a certain retirement age, as defined by the SSA. These benefits are based on the taxes you have paid over your lifetime of work and have nothing to do with your ability to work.
The SSA’s Social Security Disability Income (SSDI) benefit, however, is based on a permanent disability that prevents you from working for at least a year or that is terminal. Surprisingly, the SSA denies many of the applications they receive from qualified, disabled applicants, at least initially. A qualified South Carolina Disability Lawyer could help you with your application or your appeal. If successful, it’s important to understand how your benefit payments can affect your finances, including your taxable income.
What Is Social Security Disability?
SSD pays monetary benefits to you and possibly family members if you are permanently disabled for at least one year, or your disability is expected to last at least one year, or if your disability will result in your death. It is slightly different than Supplemental Security Income, or SSI, which pays out benefits to disabled adults and children who have few or no other resources to meet their basic living needs.
Who Qualifies for Ssd Benefits?
If you have a disability that prevents you from working, you don’t automatically qualify for SSD benefits. First, the SSA will review whether you are “insured” through your Social Security taxes that you have paid on your earnings throughout your working lifetime, as well as how recently you were working prior to your disability.
You will need to submit information about your work history over the last 15 years, including any military service. This means that the younger you are, the less likely you are to qualify for benefits, and if you do, they will be less than if you are an older worker.
The SSA will also want to know about any other benefits you may be receiving or plan to apply for, including:
Any other federal benefits
State or local government benefits
Civil Service Disability Retirement
Military disability benefits (not Veterans’ Administration disability benefits)
Black Lung Benefits
Long Shore and Harbor Workers’ compensation
Then, the SSA will determine whether your disability meets its requirements. You will need to submit detailed medical information, including information about your diagnosis, tests and treatments, contact information for your medical care team and facilities, and any current medications you are taking.
SSD is only for those who are permanently disabled, meaning that the disability is likely to prevent you from working at your current job or any other job for twelve months or more. Your dependents may also be eligible to receive benefits under certain circumstances. If the SSA determines that you are temporary or partially disabled or that you can work at a different type of job, neither you nor your dependents will receive SSD benefits.
Is My Social Security Disability Taxable?
You may be taxed on all or part of your SSD income, depending on your financial circumstances and how you file your taxes. The main determining factor is whether you are receiving income from other sources, such as dividends, tax-exempt interest, or a spouse’s income.
Your benefits may be taxed if you exceed the income limits. Joint filers with combined income between $32,000-$44,000 may have to pay taxes on 50 percent of their SSD benefits and 85 percent of their benefits if they make more than $44,000. Single, individual filers may have to pay taxes on 50 percent of SSD benefits with incomes between $25,000-$34,000 and 85 percent on benefits for incomes above $34,000.
Keep in mind these are just federal income tax guidelines. Some states will also tax SSD benefits. Fortunately, South Carolina does not.