Filing taxes when one spouse is on social security disability

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Social Security disability is subject to tax, but most recipients don't end up paying taxes on it.
Federal Taxation of Social Security Disability Benefits
Individuals
Married Couples
Taxation of Social Security Disability Backpay
State Taxation of Social Security Disability Benefits

Social Security disability benefits (SSDI) can be subject to tax, but most disability recipients don't end up paying taxes on them because they don't have much other income. About a third of Social Security disability recipients, however, do pay some taxes, usually because of their spouse's income or other household income. Supplemental Security Income (SSI) benefits are not taxed.

Here's how it works. If you're married and you file jointly, and you and your spouse have more than $32,000 per year in income (including half of your SSDI benefits), a portion of your SSDI benefits will be subject to tax.

If you're single and you have more than $25,000 in income per year (including half of your SSDI benefits), a portion of your SSDI benefits will be subject to tax.

How big a portion of your SSDI benefits is subject to tax depends on how high your income is. Here's a chart with monthly income amounts that tells you whether your SSDI benefits will be taxed and the maximum amount of SSDI that could be taxed. If you have over $2,083 in income per month, calculating the actual amount of SSDI benefits that will be taxed can be quite complicated. You can make the calculations on the IRS Form 1040 tax return or you can use Social Security's tax calculator.

Individuals

Amount of Monthly Income	Amount of Annual Income	Maximum Portion of SSDI to Be Taxed
0 - $2,083	0 - $25,000	0%
$2,084 - $2,833	$25,000 - $34,000	50%
$2,834 and up	over $25,000	85%

Married Couples

Amount of Monthly Income	Amount of Annual Income	Maximum Portion of SSDI to Be Taxed
0 - $2,666	0 - $32,000	0%
$2,667 - $3,666	$32,000 - $44,000	50%
$3,667 and up	over $44,000	85%

Keep in mind that, if your disability benefits are subject to taxation, they will be taxed at your personal income tax rate. In other words, your tax rate would not be 50% or 85% of your benefits; your tax rate would probably be more like 15-25% of your benefits. Those with higher incomes (where 85% of your benefits would be taxed) might pay a tax of 28% on their benefits. The tax rate is the same used for your other income.

Large lump-sum payments of back payments of SSDI (payments of benefits for the months you were disabled but not yet approved for benefits) can bump your income up for the year in which you receive them, which can cause you to pay a bigger chunk of your backpay in taxes than you should have to.

To avoid losing part of your backpay this way, the IRS allows you to apply the SSDI benefits owed from a prior year to prior tax returns, lowering your income for the year you receive the lump sum. For example, if you were entitled to disability benefits for 22 months before you received your back pay, you could amend your tax returns for two prior years to claim some of the income in those years instead of the current year. You should ask a lawyer or CPA for help on this; it's complicated. For more information, read our article on how Social Security disability backpay is taxed.

Most states don't tax Social Security disability benefits. The following states, however, do tax disability benefits in some situations.

Connecticut
Colorado
Kansas
Minnesota
Missouri
Montana

Nebraska
New Mexico
Rhode Island
Utah
Vermont, and
West Virginia

Some of these states use the same income brackets as the federal government (discussed above) to tax SSDI benefits, but most have their own systems. To find out how your state taxes SSDI benefits, see our article on state taxation of SSDI benefits.

Updated January 13, 2022

Submitted by Ram on Thu, 04/21/2011 - 13:40

Ram's Blog

One of the more common questions asked of Social Security Disability representatives is “Are my SSDI payments taxable?” The answer, quite simply, is that it depends on your total income. For most people, if Social Security Disability benefits payments represents your only income, you will not be subject to federal income taxes.

If, however, you have other income, either from your spouse or from passive income such as rent and investment income, you may be subject to taxation of part of your Social Security Disability benefits. The factors considered are whether you are married and what your total (combined, if married) income is.

If you’re single and your only income comes from your Social Security Disability benefits, you won’t need to worry about federal income tax. If you have other sources of income, your Social Security Disability Insurance (SSDI) benefits will be taxable if your total income (including your SSDI payments) is greater than $25,000 per year. Fortunately, though, you won’t have all of your benefits amount taxed. It breaks down like this, for single people:

Individuals making more than $25,000 but less than $34,000 are subject to taxation on half of their Social Security Disability benefits.
Individuals making more than $34,000 are subject to taxation on 85% of the Social Security Disability benefits.

For those who are married, your wife’s income is considered. Filing separately doesn’t help you, either, as your Social Security Disability Insurance payments will be taxed at the higher rate if you choose to file separately. Filing separately may, in certain instances, still be to your advantage because of how your income could affect your spouse’s tax liability. Check with a qualified accountant or lawyer before making the decision on whether or not to file separately.

If you are filing together, your Social Security Disability benefits are taxable if your joint income is higher than $32,000. As with single individuals, this includes all forms of income. The breakdown for married couples in which one or both of you are collecting Social Security Disability is as follows:

Couples making more than $32,000 but less than $44,000 are subject to taxation on half of their Social Security Disability benefits.
Couples making more than $44,000 are subject to taxation on 85% of their Social Security Disability benefits.

Individuals or couples who receive SSI payments do not need to worry about federal income tax because, in order to qualify for SSI, your income must be low enough that you would be exempt from taxation anyway.

Lump sum payments, such as the back pay often received when your Social Security Disability benefits are first approved, are subject to taxation in the year in which you receive them (not the years for which the benefits were granted). However, there are regulations which offset this somewhat by ensuring that you are taxed at the same rate you would have been if you had been receiving the benefit payments all along. Unless you have extensive tax knowledge, you would be well advised to seek the help of an accountant for the year in which you receive your back pay or any other sizable lump sum Social Security disability benefit payment.