Social security cards on money

If you are on SSDI, applying for it, or considering it, then you may have some serious questions regarding how it works with your annual taxes. Will you still be able to get a tax refund while you’re on disability? Should you even file your taxes at all? Is there a chance you’ll owe on your taxes because of SSDI? The ADA Group will attempt to answer all that and more.

Should you file a tax return on SSDI?

There are some that might argue that if your only income is SSDI then you do not have to file your taxes. However, there are some situations that can arise where this isn’t true. Though filing your taxes with SSDI as your only income will typically result in no payment going either to or from you, it’s often good to do so to be safe.

What if You Do Make Income In Addition to SSDI?

money and a calculator over a debts post-it

Obviously, this is when you will want to file your taxes for sure, and there are a few rules that typically prevent any of your SSDI benefits from being taxed. If you make an income in addition to your SSDI, take half of your SSDI and add it to that income. If that amount is over $25,000 if filing single or $32,000 if filing jointly, then some of your SSDI benefits may be subject to tax.

Specifically, 50% of your SSDI income will be taxed. This goes up to 85% if half your benefits plus all your other income is more than $34,000 filing single or $44,000 filing jointly. Keep in mind, this is how much of your SSDI is taxed not how much is taken.

The average SSDI benefit is currently somewhere in the neighborhood of $1,300 a month. If you multiply that by 6 (which is the same as taking half and multiplying by the 12 months of the year) you end up with $7,800. In other words, depending on your filing status, you can make between $17,200 and $24,200 in additional income before your SSDI benefits are taxed. Try it with your own SSDI earnings to get a customized estimate.

Read More: How the 2023 Social Security Cost-of-Living Increases Impact SSDI

What Does the IRS Consider to be Income?

Generally, taxable income includes any salary or wages that you have earned, profits from stock, real estate sales or earnings, and even gambling winnings. Interest earned on savings accounts, retirement income, alimony, and even unemployment benefits would also count towards your income though this would all be considered “unearned income.”

There are a few items that the IRS doesn’t consider income that we feel are worth mentioning. Child support payments, life insurance proceeds, inheritances, worker’s compensation, and some forms of compensatory damages are all not considered income by the IRS. If you are worried about how any of these might affect your tax liability in a given year, please consult a tax professional.

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Can You Still Claim Tax Credits on SSDI?

Even if SSDI is your sole income, you still can file for tax credits including the child tax credit, independent care of a spouse or dependant, earned income tax credit, and others. You can look into all that and more on the IRS website.

The ADA Group can’t help you file for your taxes, but if you have been denied SSDI benefits that you deserve, then you should reach out to our team. You can contact us online or give us a call if you’re more comfortable over the phone at 501-481-8923.

Nothing posted on this website is intended, nor should be construed, as legal advice. Blog postings and site content are available for general education purposes only.