How does receiving SSDI impact tax filing processes?

On Behalf of | Jul 19, 2022 | Social Security Disability Insurance |

Those eligible for social security disability insurance may find themselves dealing with tax complications during the next filing period.

Not all recipients must pay taxes on the benefits, and it depends on meeting the income threshold.

IRS tax requirements

According to IRS guidelines, benefits become taxable when the individual receives additional income beyond the SSDI program. Other sources could include tax-exempt interest, dividends or spousal income. If this is the situation, benefits are taxable if the total of all outside income sources, as well as a percentage of the benefits, exceeds the following requirements:

  • Filing as an individual with a combined income between $25,000 and $34,000 could require up to 50% of benefits. An income of more than $34,000 could require taxing 85% of the benefits.
  • Filing a joint tax with a combined income between spouse and benefit recipients that falls between $32,000 and $44,000 could require taxing up to 50% of the benefits received. More than $44,000 could render 85% of the benefits taxable.
  • Those married filing a separate return may need to pay taxes as well.

Income threshold

The requirements to receive SSDI set the monthly income cap at such a low level that meeting the threshold is difficult. As the earning cap is $1,350, the IRS states that only about one-third of beneficiaries end up paying taxes.

Although SSDI is a social insurance program paid for through payroll taxes, there is the possibility that you will need to pay taxes on the benefits received from the program. Those eligible for social security disability benefits ought to consider the potential filing implications and plan accordingly.

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