Are Social
Security Disability Benefits Taxable?
If you are approved
for Social Security disability benefits, your benefits may be
taxable. You may find yourself with tax obligations if you
have other sources of income besides your disability payment,
or if your spouse earns a substantial income.
If you file a
federal tax return as an "individual" and your
combined income* is between $25,000 and $34,000, you may have
to pay income tax on 50 percent of your Social Security
benefits. If your combined income is above $34,000, up to 85
percent of your Social Security benefits is subject to income
tax.
- If you are married and file a joint return, you may have to
pay taxes on 50 percent of your benefits if you and your
spouse have a combined income that is between $32,000 and
$44,000. If your combined income is more than $44,000, up to
85 percent of your Social Security benefits is subject to
income tax.
- If you are married and file a separate tax return, you
probably will pay taxes on your benefits. On your 1040 tax
return, your "combined income" is the sum of your
adjusted gross income, plus nontaxable interest, plus one-half
of your Social Security benefits.
Your CPA or tax
advisor can help you determine whether you will have income
tax liability on your disability benefits and whether you need
to set aside some of your benefits to pay estimated tax
liability.
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