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Are Social Security Disability benefits taxable?

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Learn when Social Security Disability benefits are subject to federal and state income tax.

When the IRS Taxes Social Security Benefits
Whether your Social Security benefits are taxed by the Internal Revenue Service of the Federal government depends on your total income for the year including income wages, self-employment, interest, dividends and other taxable income. The largest percentage of your benefits that is taxable is 80%. IRS filing forms and instructions tell you how to calculate the taxable portion of your benefits, and assistance is available from tax accountants and preparers.

Generally speaking, if you file an individual federal tax return and your total annual income is more than $25,000, a portion of your benefits will be taxable. If you and your spouse file a joint return and your income is over $32,000, a portion of your SSD benefits will be taxable. Additional rules apply to married couples who are filing separate returns. In each case the IRS provides a worksheet to figure how much is taxable. The IRS has special rules also for large lump-sum payments that are attributable in part to prior year eligibility.

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When Your State Taxes Social Security Benefits
Many states do not have income tax at all. Among those that do have income tax, many do not tax Social Security benefits, regardless of a person’s total income. Other states follow the federal tax guidelines for the portion of the Social Security Disability benefits they will tax, and still others tax part of the benefits with exclusions more favorable than those given by the federal IRS. Like the IRS, your state’s revenue department and tax filing forms will provide guidance.

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Are Social Security Disability benefits taxable?
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