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. IRS filing forms and instructions tell you how to calculate the taxable portion of your benefits. The portion that is taxable depends on your total income.
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.
When Your State Taxes Social Security Benefits First of all, 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.