Are Social Security Disability Benefits Taxable?

January 27, 2016
Dayes Law Firm

Eligible individuals filing for social security disability often have one question in common: are social security disability benefits taxable?

In most cases, benefits awarded through Social Security Disability will not be taxed, which is applicable for most recipients with or without additional income sources.

For individuals or spouses who do have a source of significant income aside from disability benefits, the government could tax your benefits in these scenarios:

  • For individuals with an income of $25,000 to $34,000, taxes will be paid on approximately half of the disability benefits received.
  • For those filing joint taxes, couples are allowed to have a combined income of more than $32,000 before being required to pay taxes on half the benefits they receive.
  • Individuals making over $34,000 per year will be required to pay taxes on 85 percent of disability benefits received.
  • Couples filing jointly who make over $44,000 per year must pay taxes on 85 percent of disability benefits received.

For those who are subject to having their disability benefits taxed because they exceed the income levels mentioned above, benefits will be taxed at the marginal tax rate you qualify for, depending on your income levels.

What about Lump Sum Payments?

When a lump sum payment is issued, which may include disability back pay, the recipient may be required to pay taxes on the lump amount in one year. If a portion of the lump sum was for back pay of months in another year, that income may be able to be applied to the earlier tax years income totals, which may lower the recipients tax liability.

Dayes Law Firm PC is committed to assisting you with your claim for social security disability benefits; let a Social Security lawyers in Phoenix from our office aid you in filing your claim or disability appeal.

Call 1-800-503-2000 or contact us online to schedule a free case evaluation.