Check Back For Updates To This Page
For the latest updates on coronavirus tax relief related to this page, check IRS.gov/coronavirus. Were reviewing the tax provisions of the American Rescue Plan Act of 2021, signed into law on March 11, 2021.
Find out if your and the qualify as earned income for the Earned Income Tax Credit .
Find out how you can if the person has a total and permanent disability.
If you’re unsure if you qualify for the EITC, use the EITC Qualification Assistant.
Social Security Disability Benefits And Supplemental Security Income
Social security benefits include monthly retirement, survivor, and disability benefits. These benefits should be reported on Form SSA-1099. You have to report this amount on your tax return, as a portion of this may be calculated as taxable on the Taxable Social Security Benefits Worksheet.
Supplemental security income payments are NOT taxable, and thus do not need to be reported on your tax return.
See IRS Publication 915 Social Security and Equivalent Railroad Retirement Benefits for more information.
To enter social security benefits in TaxAct®:
Was this helpful to you?
What Percentage Of Social Security Is Taxable
If you file as an individual, your Social Security is not taxable only if your total income for the year is below $25,000. Half of it is taxable if your income is between $25,000 and $34,000. If your income is higher than that, up to 85% of your benefits may be taxable.
If you and your spouse file jointly, you’ll owe taxes on half of your benefits if your joint income is between $32,000 and $44,000. If your income is above that, up to 85% is taxable income.
Available Credits For Disability Recipients
You may get a tax refund on disability in certain situations if you dont owe, but file claiming certain tax credits. For example, you may get a credit for being disabled if you received benefits from an employer insurance or pension plan. The IRS also offers a credit for costs related to the independent care of a spouse or dependent if the person claiming the credit is looking for work.
There is also an Earned Income Tax Credit for taxpayers with disabilities and parents of children with disabilities. Many individuals with disabilities miss out on this valuable tax credit because they dont file a tax return. Learn more about this credit here.
If you have questions about SSDI and SSI, or have been denied disability by the Social Security Administration, dont hesitate to call Tabak Law at 844-432-0114.
Is Social Security Disability Taxable
OVERVIEW
To qualify for Social Security Disability Insurance, you must meet certain conditions. Well help you navigate your eligibility and tax responsibility for Social Security disability.
In the U.S., if you work long enough, pay your taxes, and meet certain income thresholds during your career, you can participate in Social Security programs. Over time, you pay into this system and can expect to receive several benefits for you and your family.
If you worked but become disabled and have limited resources and means to earn income, the Social Security Disability Insurance program can assist. The program pays benefits to you and your children. But because your taxes fund this program, you may wonder is Social Security disability taxable? Let’s find out.
What Benefits Does Social Security Disability Insurance Offer
The amount you receive from Social Security Disability Insurance depends on your average lifetime earnings before your disability began. Generally, the more you earned over a longer period, the more you’ll benefit. The Social Security Administration calculates your disability benefit based on the amount of your Social Security “covered earnings.” Generally, these are your past earnings that have been subject to Social Security tax.
You need to take your covered earnings and average them over the 35-year period representing your top earning years. The IRS sees this as your average indexed monthly earnings . The Social Security Administration then applies a formula to your AIME to calculate your primary insurance amount . This serves as the base figure for the Social Security Administration to calculate your Social Security Disability Insurance benefit amount.
To understand your entire covered earnings history, the Social Security Administration provides access to your annual Social Security Statement. If you receive other disability benefits from private insurers, this will not impact your Social Security Disability Insurance benefits.
Is Your Condition Found In The List Of Disabling Conditions
For each of the major body systems, we maintain a list of medical conditions that we consider severe enough that it prevents a person from doing substantial gainful activity. If your condition is not on the list, we have to decide if it is as severe as a medical condition that is on the list. If it is, we will find that you are disabled. If it is not, we then go to Step 4.
We have two initiatives designed to expedite our processing of new disability claims:
- Compassionate Allowances: Certain cases that usually qualify for disability can be allowed as soon as the diagnosis is confirmed. Examples include acute leukemia, Lou Gehrigs disease , and pancreatic cancer.
- Quick Disability Determinations: We use sophisticated computer screening to identify cases with a high probability of allowance.
For more information about our disability claims process, visit our Benefits For People With Disabilities website.
Save Time Business Owners Can Report Wages Online
Do you manage payroll responsibilities for some of your clients? Use our Business Services Online to report employee wages and verify names and Social Security numbers for W-2s.
Business Services Online is a suite of services that allows organizations, businesses, employers, and third parties to exchange information with Social Security securely over the internet.
BSO allows you to send W-2s and W-2cs to Social Security either by uploading a specifically formatted electronic file or by directly keying W-2s and W-2cs in an online form. This allows you to view the processing status, errors, and error notices for wage files and/or wage reports submitted by or for your company. In addition, a one-time 15-day extension of the deadline for resubmitting wage data can be requested.
You must register and create your own password to access Business Services Online.
One of our priorities is getting our customers secure access to the information they need when, where, and how they need it. Our online services have never been better or easier to use. Social Security is here to help you and your clients secure today and tomorrow.
How Do I Determine If My Social Security Is Taxable
Add up your gross income for the year, including Social Security. If you have little or no income in addition to your Social Security, you won’t owe taxes on it. If you’re an individual filer and had at least $25,000 in gross income including Social Security for the year, up to 50% of your Social Security benefits may be taxable. For a couple filing jointly, the minimum is $32,000. If your gross income is $34,000 or more, up to 85% may be taxable. The minimum for a couple is $44,000.
Paying Taxes On Social Security
You should get a Social Security Benefit Statement each January, detailing the benefits you received during the previous tax year. You can use it to determine whether you owe federal income tax on your benefits. The information is available online if you enroll on the Social Security site.
If you owe taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or have federal taxes withheld from your payouts before you receive them.
Your Clients Can Get A W
If you are working with a client who receives Social Security benefits, remember that they have the option of federal income tax being withheld from their benefits at the rate of 7, 10, 12, or 22 percent. Encourage them to sign and submit IRS Form W-4V directly to their local Social Security office.
This same form can be used to stop withholding federal income tax from their benefits. Taxes will be paid directly to the Internal Revenue Service and will be shown on their form SSA-1099 the following tax season.
State Taxes On Social Security
There are 13 states which tax Social Security benefits in some cases. If you live in one of those statesColorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginiacheck with the state tax agency. As with the federal tax, how these agencies tax Social Security varies by income and other criteria.
Tax Filing And Refund On Social Security Disability
If your only income is social security disability benefits, its unlikely that you will owe the IRS anything at the end of the year or need to file a return. Clearly, if you dont file, you also wont earn a refund check. But, this is only if your sole income is the benefits. Other sources of income that could require you to file a full tax return include owning rental property, or an interest-bearing savings account.
The IRS will tax a percentage of your social security disability benefits depending on your income level and filing status. If you are single, your income must be $25,000 or higher. This is combined income, which includes taxable wages, interest, dividends, pensions and half of your social security benefits. If you are filing a joint return with a spouse, this number rises to $32,000.
If you have no other income, or very limited income, other than SSDI, you likely will not have to file a tax return and subsequently will not receive a tax refund. The average social security disability benefit is around $1,200, so you will easily be under the annual threshold with that amount coming in.
If you are married and filing separately, the rules change a bit. If you file in this manner and lived with your spouse at any time during the year, 85% of your disability benefits would then be taxable. This is in place to avoid married individuals from evading taxes that would be incurred from a spouses income.
The Back Payment Issue
If you have just begun receiving Social Security Disability payments and you received a back payment from the SSA, you need to be very careful when filing taxes and claiming your back payment amount as income on your tax return. Back payments are usually paid as a lump-sum amount by the SSA. This does not mean, however, that you should claim the full amount on the tax return for a single year. If you do claim your back pay as a single year’s income, it will put you in a higher tax bracket and you may end up paying more taxes than you are actually liable for. Instead, you should file amended returns for the years that the back payment covered and only claim this year’s payment on your current year’s income tax return.
An Example Of Taxable Ssdi Benefits
Lets say youre single and your income for the 2020 tax yearthe tax return you file in 2021includes $12,000 in SSDI benefits and $20,000 in other income. Combining your other income with half your SSDI benefits gives you taxable income of $26,000. Since that falls into the $25,000 to $34,000 range, youll pay taxes on 50% of your benefits.
Your $26,000 income puts you in the 12% tax bracket. So youll pay 10% in taxes on the first $9,875, and then 12% on everything above that.
What We Mean By Disability
The definition of disability under Social Security is different than other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability.
We consider you disabled under Social Security rules if all of the following are true:
- You cannot do work that you did before because of your medical condition.
- You cannot adjust to other work because of your medical condition.
- Your disability has lasted or is expected to last for at least one year or to result in death.
This is a strict definition of disability. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers’ compensation, insurance, savings, and investments.
Income Taxes And Your Social Security Benefit
Some of you have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits .
You will pay tax on only 85 percent of your Social Security benefits, based on Internal Revenue Service rules. If you:
- file a federal tax return as an “individual” and your combined income* is
- between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $34,000, up to 85 percent of your benefits may be taxable.
Can I Deduct Disability Insurance Premiums As A Business Expense
Whereas regular disability insurance covers individual income, a business overhead expense policy will help cover monthly business expenses such as employee salaries, rent, utilities, maintenance, taxes, etc. Premiums for this type of insurance are considered a business expense and are therefore tax-deductible.
Adults Disabled Before Age 22
An adult who has a disability that began before age 22 may be eligible for benefits if a parent is deceased or starts receiving retirement or disability benefits. We consider this a “child’s” benefit because it is paid on a parent’s Social Security earnings record.
The disabled “adult child” including an adopted child, or, in some cases, a stepchild, grandchild, or step grandchild must be unmarried, age 18 or older, have a disability that started before age 22, and meet the definition of disability for adults.
Example
It is not necessary that the disabled “adult child” ever worked. Benefits are paid based on the parent’s earnings record.
- A disabled “adult child” must not have substantial earnings. The amount of earnings we consider “substantial” increases each year. In 2021, this means working and earning more than $1,310 a month.
Working While Disabled: How We Can Help
How Is Income Counted
Social Security does not count all income toward the SSI limit. Examples of non-countable income are the first $20 of most kinds of income you receive in a month, part of your wages , SNAP , tax refunds, public benefits based on need, and loans that you have to repay. In addition, Social Security allows you to deduct any impairment-related work expenses from your income.
Is It Worth Claiming Medical Expenses On Taxes
For tax returns filed in 2021, taxpayers can deduct qualified, unreimbursed medical expenses that are more than 7.5% of their 2020 adjusted gross income. So if your adjusted gross income is $40,000, anything beyond the first $3,000 of medical bills or 7.5% of your AGI could be deductible.12 avr. 2021
What Substantial Gainful Activity Means For The Self
The “inability to engage in substantial gainful activity” is required to be approved for SSDI or SSI disability benefits; in 2021, you can’t make more than $1,310 per month and qualify for SSDI .
If you are self-employed, however, the SSA recognizes that your net profit isn’t necessarily a good indicator of whether you’re doing substantial gainful activity. Instead, the SSA will apply what they call “The Three Tests” to determine if your work activity is SGA. Your work will be considered SGA if you perform work that:
- provides significant services to the business and brings in $1,310 or more in average monthly income
- is comparable to the work of persons without disability in your community engaged in the same or similar businesses, or
- is worth $1,310 per month in terms of its effect on the business or what it saves you from having to pay an employee to do the work.
If you’ve been receiving Social Security disability benefits for more than two years, this test is a bit easier to meet.
In judging your income, the SSA will deduct any “unincurred business expenses” from your net earnings, which are expenses that you don’t pay forthat is, contributions made by others. For example, if a friend volunteers for your business to help you out or if you receive equipment through a vocational training program, the value of these expenses is deducted from your net earnings to give the SSA a more accurate value of your work.
Is There Any Way To Get A Monthly Raise Once Im On Social Security Disability
Yes! In some cases, you can get paid more money each month. But these adjustments are usually pretty small, so dont expect your payments to jump dramatically.
Things that can increase your Social Security disability benefits include:
Your Clients Can Get Their Social Security Statement Anytime Online
Your clients can get their personal Social Security Statement anytime by using their online mySocial Security account. The online Statement gives your clients secure and convenient access to their earnings records. It also shows estimates for retirement, disability, and survivors benefits.
You can share this Social Security Matters blog post about the Social Security Statement as well.
When Social Security Is Not Taxable
You won’t owe federal tax on your Social Security benefits if your total income falls below the taxable thresholds set by the IRS.
You won’t owe state taxes on your benefits if you live in any of the 37 states that don’t tax this income. You can minimize the tax burden by adopting one of the strategies below.
Will I Get The Child Tax Credit If I Receive Social Security Benefits
WASHINGTON With the American Rescue Plan changes to the child tax credit, some are wondering if they are eligible or not if they receive Social Security benefits.
The American Rescue Plan, passed in March, increases the child tax credit from a maximum of $2,000 to as much as $3,600 per child and will include the option for families to receive monthly installments.
If My Only Income Was Social Security Benefits Can I Claim The Child Tax Credit
It depends. If your benefits are taxable, then you can claim the child tax credit.
According to the Social Security Administration, you pay 85% of your Social Security benefits if you:
- file a federal tax return as an individual and your combined income* is
- between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
- more than $34,000, up to 85 percent of your benefits may be taxable.
The child tax credit will reduce the tax owed, so it needs some taxable income from Social Security to be applied to. The additional child tax credit can only be claimed on earned income, so you need to make money outside of Social Security benefits.
Casualties Disasters And Thefts
A casualty occurs when property is damaged as a result of a disaster such as a hurricane, fire, car accident or similar event. Generally, you may deduct a casualty loss only in the tax year in which the loss occurred. However, if you have a casualty loss from a disaster that occurred in an area declared by the President or the Governor as a disaster area, the loss may be claimed for the year in which the disaster occurred, or the year immediately before the loss.
Only In Certain States Or If Your Income Exceeds The Federal Limits
Social Security disability benefits may be taxable if you have other income that puts you over a certain threshold. However, the majority of recipients do not have to pay taxes on their benefits because most people who meet the strict criteria to qualify for the program have little or no additional income.
What Is The Disability Tax Credit
The disability tax credit is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.
The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers dont have to face.
Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the Canada workers benefit, and the child disability benefit.
How To Claim Disabled Adults As Dependents On Income Tax Returns
Caring for a disabled adult might qualify for an extra tax benefit by claiming that person as a dependent on your return. To be considered permanently and totally disabled by the Internal Revenue Service, the person you claim must not be able to do any substantial gainful activity and a doctor must decide the condition must be expected to last for at least a year or end in death. To claim the person as a dependent, the person must meet either the qualifying child or qualifying relative criteria set forth by the IRS.
Sheltered Employment And Substantial Gainful Activity
We do not consider sheltered employment substantial gainful activity.
Sheltered employment is when a child with a physical or mental disability works for minimal pay under a special program.
If people with physical or mental disabilities work for minimal pay, it must be done at a qualified location. Qualified locations include:
- Sheltered workshops
Apply For Benefits Online
You should apply for disability benefits as soon as you become disabled. Follow these easy steps to apply online for disability:
- To start your application, go to our Apply for Benefits page, and read and agree to the Terms of Service. Click Next.
- On that page, review the Getting Ready section to make sure you have the information you need to apply.
- Select Start A New Application.
- We will ask a few questions about who is filling out the application.
- You will then sign into your mySocial Security account, or you will be prompted to create one.
- Complete the application.
You can use the online application to apply for disability benefits if you:
- Are age 18 or older.
- Are not currently receiving benefits on your own Social Security record.
- Are unable to work because of a medical condition that is expected to last at least 12 months or result in death; and
- Have not been denied for disability in the last 60 days.
Note: If your application was recently denied, our application is a starting point to request a review of the determination we made.
You may be able to file online for SSI at the same time that you file for SSDI benefits. Once you complete the online process above, a Social Security representative will contact you if we need additional information.