They say that the only two certainties in life are death and taxes. Does this apply to Social Security Disability (SSD) benefits? After all, you only qualified for SSD because you are disabled and can no longer work enough to earn a livable income. Does the IRS expect me to pay part of my benefits in income taxes?
As often happens in the law, the answer is, “It depends.” Specifically, it depends on what other sources of income you have and how much you make from them.
When your ‘provisional income’ becomes taxable
The IRS considers your “provisional income” when it decides whether you need to pay tax on your SSD payments. Provisional income includes your adjusted gross income, tax-exempt income from interest, and half your annual SSD income. If the sum of those three sources of income is less than $25,000 for an individual (or $32,000 for a married couple filing jointly), you won’t owe any income taxes on your benefits. If the total is between $25,000 – 34,000 for an individual ($32,000 – $44,000 for a jointly filing married couple), up to half of your SSD benefits will be subject to taxation.
And if your provisional income is more than $34,000 as an individual or $44,000 as a jointly filing couple, 50 to 85 percent of your benefits will be taxed. Keep in mind this does not mean you must pay up to 85 percent of your benefits in taxes; that is just the percentage of your SSD benefits that will be subject to taxation for that given tax year.
The Social Security Administration allows SSD recipients to work and earn a certain amount of income, as much as their disability allows. But you should be aware that you might be subject to income tax if you earn a significant level of money through work.