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How Much of My Social Security Disability Benefits Are Taxable?

Posted By Corey Luedeman - 12.07.20

If you receive Social Security Disability benefits, you may have heard that you need to pay taxes on these benefits. But is that actually true?

Paying Taxes on SSI Benefits

Supplemental Security Income (SSI) recipients rarely have to pay taxes on any benefits they receive. This is because SSI is a needs-based program. Since SSI as a program has income limits, it’s unlikely you’ll make enough to both qualify for SSI benefits and make enough to pay income taxes.

Do You Have to Pay Taxes on SSDI Benefits?

Your Social Security Disability Insurance (SSDI) benefits may be taxed in some situations. This usually happens if you have other substantial income in addition to your benefits, like interest, dividends, or other taxable income you have to report on your taxes. 

If you file a tax return where you make more than $25,000 as an individual or $32,000 as a married couple who file jointly, you may have to pay income tax on up to 50 percent of your benefits.

According to the SSA, you can have federal tax withheld from your benefits or make quarterly payments to the IRS if you owe taxes. 

There are some states that tax Social Security Disability benefits. However, Iowa is not a state that taxes SSDI benefits. You should not owe any state taxes on disability benefits. If you have questions about this or believe your benefits are being taxed, you should speak with the Social Security Administration to get more information. 

Taxing Your Disability Back Pay

Many Social Security recipients receive a lump sum for back payment disability benefits. This is due to the Social Security Disability appeals process taking so long to award benefits to those who qualify. You could potentially have to pay taxes on disability back payments.

However, because these are past-due benefits, you can divide your lump sum when reporting it into the years to which it applies.

For example, if you applied for disability benefits in 2018 but just received a lump sum payment in 2020, your payment may be able to be spread out over 3 years. This may result in lowering or eliminating taxes on your back payment.

Because this can be confusing, and because we are not tax attorneys, we recommend you find a tax attorney to give you specific advice or call the Social Security Administration to get more information about your particular claim.

If you have applied for Social Security Disability benefits and have been denied, we may be able to help. Please call RSH Legal in Cedar Rapids today at 1-800-433-0283.

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