Social Security benefits that may be subject to federal taxation include monthly retirement, survivor, and disability insurance benefits.
The amount of federal taxes owed on Social Security Disability Insurance benefits depends on the total amount of your yearly income. If you receive less than $25,000 in annual disability benefits and no other income, you generally won’t be required to pay federal income taxes on your Social Security Disability benefits.
Federal Tax Implications of Receiving SSD Benefits
Some people who receive Social Security Disability Insurance benefits will have to pay income tax. If your countable income exceeds certain thresholds, you must include a portion of your Social Security benefits in adjusted gross income reported for tax purposes. That creates some income tax liability on your Social Security Disability benefits.
If your total income, including SSD benefits, is higher than the Internal Revenue Service (IRS) thresholds, then the amount that is over the limit is subject to federal income tax. Your total income is determined by adding one-half of your disability benefits to all other sources of income.
You may have to pay taxes on your benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint tax return, you may have to pay taxes if you and your spouse have a total income of more than $32,000 a year. If you’re married and file a joint return, the combined income of you and your spouse and the Social Security benefits either of you received is used to calculate the taxable portion of your benefits.
If SSD benefits are your sole income and you receive less than $25,000 in annual benefits, your Social Security income will generally not be subject to federal taxes. For married couples filing jointly, the threshold is $32,000.
Social Security Disability Insurance payments are based on your average earnings from jobs that require you to pay Social Security taxes. For 2024, the average SSD payment is $1,537 per month ($18,444 per year). The maximum SSD payment in 2024 is $3,822, or $45,864 per year.
Social Security benefits are recalculated every year to adjust to the increasing cost of living. The annual cost-of-living adjustment amount for SSD is determined by increases in the Consumer Price Index (CPI).
Can I Earn Income While Receiving SSDI Benefits?
The Social Security Administration’s Ticket to Work program makes it possible for people receiving SSDI benefits to work and still receive monthly benefit payments.
The program’s trial work period allows you to test your ability to work for at least nine months, during which you’ll receive your full SSD benefit, regardless of how much you earn. Because you are testing your ability to return to work, you are allowed to work for a total of 9 months over a 60-month period.
After your trial work period, you have 36 months (3 years) during which you can work and still receive benefits for any month your earnings do not exceed a certain threshold.
Age-Based Exemptions from SSD Taxes
What you pay in federal taxes does not depend on your age or when you claim Social Security Disability Insurance benefits. Federal income taxes are based on the amount of taxable income you receive each year.
Texas State Tax Implications
Because Texas does not have an income tax, no state taxes are assessed on Social Security benefits paid to Texas residents.
Factors Affecting Taxability of SSD Benefits
Federal income taxes that an individual must pay are based on their total income during the calendar year.
An individual’s SSD benefits may be taxable if the total of one-half of their benefits, plus all of their other income, including tax-exempt interest, is greater than the base amount for their filing status.
The base amount for your filing status is:
- $25,000 if you’re single, head of household, or a qualifying surviving spouse.
- $25,000 if you’re married, filing separately, and lived apart from your spouse for the entire year.
- $32,000 if you’re married filing jointly,
- $0 if you’re married, filing separately, and living with your spouse at any time during the tax year.
If a married couple files a joint return, both spouses must combine their incomes and Social Security benefits when determining the taxable portion of their benefits. Even if one spouse didn’t receive any benefits, each spouse’s income must be added together for a joint return to determine if their total income exceeds $32,000.
Do You Have Specific Questions? Contact Our Law Firm Today
Reach us today to learn more at what age do you stop paying taxes on social security disability. Contact us online or at (214) 999-9999 for a free, no-obligation consultation. Our Dallas social security disability lawyers will do their best to help you and clarify any doubts.
