Is Social Security Disability Taxable?
A common question that we hear from many of our clients at Binder & Binder® is " Is Social Security Disability taxable income?" Unfortunately, just like when you were filing for Social Security Disability, the answer is not a simple yes or no.
If you are approved for Social Security Disability, your benefits may be taxable, especially if you have other sources of income besides your disability payment, or if your spouse earns a substantial income. The good news is that Social Security Disability taxes are generally very low, if anything at all.
If You File as an Individual
If you file a federal tax return as an individual and your combined income (meaning your benefits plus any other sources of income) is between $25,000 and $34,000, you may have to pay taxes on 50 percent of your Social Security Disability benefits. If your combined income is more than $34,000, you may have to pay taxes on up to 85 percent of your Social Security Disability benefits.
If You are Married and File a Joint Return
If you are married and file a joint return, and you and your spouse have a combined income that is between $32,000 and $44,000, you may have to pay taxes on 50 percent of your benefits. If your combined income is more than $44,000, you may have to pay income tax on up to 85 percent of your Social Security Disability benefits.
Additional rules, regulations and exceptions apply. For instance, you are allowed a deduction for every expense you incur in preparing for your case or Social Security Disability appeal. Your accountant or tax attorney can help you determine whether you will have to pay Social Security Disability taxes and whether you need to set aside some of your benefits to pay these taxes.
So, " is Social Security Disability taxable income?" Short answer: yes. Long answer: sometimes. Have more questions? If you're disabled and you can't work anymore, call Binder & Binder® at 1-800-66-BINDER and we can answer any and all questions you might have about your Social Security Disability status or claim.