Social Security disability payments provide vital income support for millions of people. These benefits are not normally taxable. However, there are exceptions. There are actually two income programs for people with disabilities: Social Security Disability Income and Supplemental Security Income. The rules are different for these programs, so you have to look at them separately.
Social Security Disability Income
SSDI benefits are paid to people with disabilities who have worked and earned enough to qualify under Social Security Administration rules. This usually means earning income for at least five of the past ten years before filing for disability. If you have only SSDI income, benefits are not taxable. Part of your benefits may be taxable if you have additional income. If you are married and file a joint return, your spouse’s income counts when determining if part of your benefits are subject to income taxes. States generally follow IRS rules when deciding if SSDI benefits are taxable.
Are Your SSDI Benefits Taxable?
According to the IRS, it’s easy to determine whether some of your SSDI benefits might be taxable. First, divide your yearly benefit amount in half. Add the result to your gross income from other sources. If the total is more than $25,000, fifty percent of your benefits could be taxable if you are single. If you are married and file a joint return, the threshold is $32,000. There are many exceptions to this general rule, and it’s best to consult with a tax professional.
Lump Sum Payments
The Social Security Administration has strict rules for deciding whether a person is entitled to receive disability benefits. Sometimes a claim is erroneously denied. If benefits are eventually awarded, the recipient is paid retroactively from the time benefits should have started. However, this lump sum is received in a single tax year, which means that some of it is likely to be taxable under the IRS rules already discussed.
Supplemental Security Income
People with disabilities who do not qualify for SSDI may receive SSI benefits. This program is administered by individual statistics, and state rules vary. In general, beneficiaries are allowed only minimal assets and income. This includes a spouse’s income. Consequently, if a person with a disability makes enough to make some SSI benefits taxable, she is ineligible for SSI benefits. On occasion, a person will receive a lump sum payment that is large enough to make some of the money subject to taxes.
Whether or not Social Security Disability benefits are taxable income, if you need help, apply. If your claim is denied despite legitimate reasons of need, consider contacting an attorney with disability experience. He or she can help you appeal the decision, and hopefully get the financial assistance you deserve.
Author Info: Shae Holland is a professional copywriter with expertise on a range of topics. She’s passionate about healthy living, loves hunting, and relishes philosophical conversations.