By Terri Lannan, Benefits and Employment Specialist
Preparing your taxes when you receive Social Security Disability Insurance (SSDI) benefits can feel overwhelming, but understanding the basics can help! These basics are especially important to know if you work, your spouse works, or you receive a high SSDI payment.
In this article, we’ll explain how SSDI taxes work, how much of your benefits could be taxed, and how you can avoid a large end-of-year tax bill. Let’s break it down so you can stay informed and prepared.
Is SSDI Income Taxable?
SSDI income is not always taxable. However, if your SSDI payments are high or if you and/or your spouse earn additional income, some of your SSDI may be taxed.
To figure out if your SSDI income is taxable, Social Security adds together:
- Half of your annual SSDI amount, and
- Your (and your spouse's) other annual income.
If the total reaches a certain level, part of your SSDI benefits will be taxed:
If you are filing as single for 2024 and your total income (half your annual SSDI plus any other income) is:
- Between $25,000 and $34,000, then 50% of your SSDI is taxable.
- Above $34,000, then up to 85% of your SSDI is taxable.
If you are filing jointly for 2024 and your total income (half your annual SSDI plus any other income) is:
- Between $32,000 and $44,000, then 50% of your SSDI is taxable.
- Above $44,000, then up to 85% of your SSDI is taxable.
Can I Avoid a Large End-of-Year Tax Bill?
To avoid a large tax bill at the end of the year, you can choose to have taxes taken out of your SSDI payments. This is called voluntary tax withholding. You can ask to have 7%, 10%, 12%, or 22% of your SSDI payment withheld for taxes.
To set this up, fill out Form W-4V and take it to your local Social Security office. To change your voluntary withholding amount, you will need to submit a new W-4V.
It may take one or two months for the withholding to be taken out of your SSDI payment.
Learn More
Learn more about taxation of SSDI in IRS publication 915.
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