If you receive disability benefits through the Social Security Disability Insurance or Supplemental Security Income programs administered by the Social Security Administration, need to know about income tax rules that may apply to you. Depending upon what other income you receive in addition to SSD income, you may be required to report the disability benefits as income.
The Internal Revenue Service applies complicated rules to determine whether you must pay federal income taxes on your disability income, but the information contained in this article should help make them clearer and easier to understand. Your disability lawyer at London Eligibility is always an excellent resource for answers to questions you have about your benefits.
Social Security Reports Your Benefits To The IRS
The Social Security Administration files form SSA-1099 with the IRS reporting the SSD benefits that you received for the previous year. The form is filed in January with a copy mailed to you. If lose the form or do not receive it in the mail, either because you moved or for some other reason, a copy of it is available through the Social Security website.
The form you receive from Social Security has all the information you need for your federal income tax return and the income tax return you file with your state. You need to know how much you received in total disability benefits during the year and the amount of income you received from other sources to know whether your benefits are taxable.
In addition to disability income, other Social Security benefits that you may owe income taxes on to the IRS include retirement and survivor benefits. These other types of benefits will be reported to you and to the IRS on the SSA-1099 form in January of each year.
Sources Of Other Income
Income that you have from other sources plus one-half of your SSD income is your combined income for the year. The combined income and type of federal income tax return that you file determines whether you pay taxes on your benefits and on how much of the benefits as follows:
- 1). If you file a federal tax return as an individual and your total combined income from other sources and disability benefits is $25,000 to $34,000, you may owe taxes on up to one-half of the disability benefits that you received.
- 2). If you file as an individual and have more than $34,000 in combined income, you may owe federal income taxes on up to 85% of the disability benefits that you received.
- 3). If you file a joint income tax return and report combined income with your spouse of $32,000 to $44,000, you may be required to pay taxes on as much as 50% of your disability benefits.
- 4). If you file a joint income tax return and report combined income with your spouse that exceeds $44,000, you may be taxed on as much as 85% of the disability benefits you received during the year.
- 5). If you are married, but file separately from your spouse with whom you lived during at least part of the tax year, you may be required to pay taxes on up to 85% of your disability benefits.
Other sources of income that are used to determine your combined federal income include the following:
- 1). Wages and salary
- 2). Self-employment income
- 3). Interest income
- 4). Dividends
Any source of income that must be reported on your federal income tax return is included when calculating combined income.
If you qualify for SSDI and are owed benefits from the onset of your disability until your monthly payments began, you could receive a lump-sum payment from Social Security. The lump sum may affect how much you owe in federal income taxes for the year or for a prior tax year, so talk to your SSD lawyer or a professional tax preparer for advice and guidance about how it should be handled.
SSI Payments And Income Taxes
The eligibility guidelines for the SSI program have strict limits on how much income you can receive and the resources you own because it is a need-based program. The purpose of SSI benefits is to provide a monthly benefit to help you pay for food and shelter, so most people receiving SSI do not have enough income from other sources to make their benefits taxable. However, the same rules as far as combined income and type of tax return apply to SSI beneficiaries as they do to people receiving SSDI.
If you need help with SSI benefits, speak to an SSI lawyer. The lawyer may have the answers to your questions or be able to get them for you.
Speak With An SSD Lawyer
Although most states do not tax SSD income, about 12 stays continue to tax them to some extent. An SSD lawyer or a disability advocate can be an excellent resource for advice and representation about all things related to SSD benefits, including income taxes in your state. If you need assistance, contact London Eligibility for a free consultation.