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Taxing your SSDI benefits: is it possible?

Social Security Disability Insurance and Supplemental Security Income are two different forms of disability benefits for people who can no longer work due to a disability. SSDI has a more stringent set of rules to qualify for the benefits, but they provide more robust financial support. Supplemental Security Income is a bit easier to qualify for, as they are meant for people with limited or no financial resources.

SSI also doesn't require an individual to have a worked a certain number of years to qualify, unlike SSDI benefits.

These benefits are obviously very helpful and people with disabilities who qualify for these benefits depend on this financial support to live their lives. So an important question to answer in regards to these benefits is "can the IRS tax your Social Security disability benefits?"

In the case of SSI, the answer is "no." Supplemental Security Income is exempt from taxes, and therefore don't need to be reported as taxable income on your returns.

SSDI benefits, however, could be taxed -- though it depends on the circumstances. Most people won't have to include their SSDI benefits as taxable income. However, some people may have to if they earned too much from their sources of income while also collecting SSDI benefits. If you are an individual, one-half of your SSDI benefits plus whatever your other sources of income are (including investment income) cannot exceed $25,000. If they do, then your SSDI benefits will be taxed. For joint filers, the threshold is $32,000.

Source: Motley Fool, "Is Social Security Disability Taxable?," Dan Caplinger, June 4, 2016

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The Law Offices Of Martin Taller

2300 E. Katella Ave. Suite 440
Anaheim, CA 92806

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