Aspectos destacados clave
- Although SSDI may be taxed at the federal level depending upon the total income, Social Security benefits are not taxed by Washington State.
- Supplemental Security Income (SSI) is non-taxable.
- In some bracketed groupings of a person’s income, up to 85% of SSDI will be subject to federal income tax.
- Nevertheless, most SSDI recipients living in the state of Washington pay virtually no federal taxes.
- Even if you do not owe any taxes, you might be required to file a tax return against your disability income.
Looking for a Washington Social Security Disability Lawyer Right Now?
Every year, thousands of people living in Washington rely on their Social Security Disability benefits; but, there are many that become confused as to whether SSDI taxable income rules do apply and whether or not the Social Security Administration has the right to charge federal taxes on Social Security Disability benefits.
Disabled individuals face financial hardships in addition to their medical disabilities, and it is common for them to be confused about the taxation affliction upon their disability income, their filing obligation, and whether they need to apply for federal taxes on their social security disability benefits.
I am attorney Matthew Russell de Russell y Hill Bufete de abogados and I represent disabled workers from all over Washington State and consult with disabled individuals as to whether they have to pay federal taxes on SSDI, how they can expect to be taxed upon their disability income, and how the federal rules will impact their overall long-term financial security.
¿Está sujeta a impuestos la discapacidad del Seguro Social?
Under particular situations SSDI is subject to taxation. As indicated in IRS Publication 915 (Social Security and Equivalent Railroad Retirement Benefits), SSDI may be taxed on your entire amount if you are above the specified limits regarding your total taxable income.
An individual’s combined income is subject to tax as 50% up to some limits of the recipient. Additionally, the amount taxed could reach 85% at the higher limits listed above in the case of excess taxes.
Is Social Security Disability Income Taxable by the IRS?
The IRS uses a “combined income” formula in determining whether the benefits you receive through SSDI are income taxable.
Combined Income
- AGI
- Nontaxable Interest
- One-Half Of Your SSDI Payments.
This is considered your overall income by the IRS to determine whether you exceed the taxable limits for SSDI benefits.
How Much of SSDI Is Taxable?
Here are the federal thresholds for Social Security disability taxes:
| Filing Status | Combined Income | Portion of SSDI Taxable |
| Single | $25,000 – $34,000 | Up to 50% |
| Single | Over $34,000 | Up to 85% |
| Married Filing Jointly | $32,000 – $44,000 | Up to 50% |
| Married Filing Jointly | Over $44,000 | Up to 85% |
The below limits of annual income in your combined income will determine whether you are subject to the federal government taxing your SSDI:
Example: Washington Resident
In the example below we will use an individual in Washington, Seattle, receiving approximately $24,000 of annual SSDI benefits and working part-time earning another $10,000.
Combined Income Calculation
AGI: $10,000 + 1/2 SSDI:$12,000 = $22,000
Because $22,000 combined is below $25,000, you will not pay any federal taxes on your SSDI benefit.
This is why numerous SSDI recipients are not subject to taxation on their benefits.
When Is SSDI Taxable?
SSDI is taxable when:
- Additional income (work, pensions or investments)
- Other spouse earns
- income Large sum of back pay (including survivors benefit)
- Taxes can be withheld if filed jointly and household income exceeds tax thresholds.
If you receive only SSDI and no other income the benefit is usually tax exempt.
Does Washington State Tax Social Security?
No State Income Tax in Washington state (SSDI not taxed).
The state of Washington does not have a state income tax so:
- SSDI is not taxed by State of Washington
- SSI is not taxed by State of Washington
- Retirement social security is not taxed by State of Washington
You can confirm the information by checking the Washington State Department of Revenue sitio web.
This makes living with SSDI in WA much better off than most other states that do have income taxes.
Real Washington Data
According to the Social Security Administration:
- More than 200,000 WA residents collect SSDI.
- The average monthly SSDI payment to a WA resident is roughly $1500-1700 based on work history.
- More than 8 million people collect SSDI benefits across the United States.
Approximately 75% of SSDI recipients living in WA fall below the federal tax thresholds.
Do You Have to File Taxes on Disability Income?
This question is one of the most commonly misunderstood.
Do SSDI Recipients Have to File Taxes?
This all depends on whether:
- Your total income is above the amount required to file.
- You have some other taxable income.
- Taxes were withheld from your federal government payments and you want a refund.
If, however, your SSDI payment is tax-free, you may be required to file a return.
Do You File Taxes on Social Security Disability If You Owe Nothing?
Yes; sometimes filing is still necessary, even if you owe $0 to the IRS.
For example :
- You qualify for a refundable tax credit.
- You are married and your spouse is earning income.
- You received a retroactive (back payment) check for SSDI.
It is important to remember that the question, “Do I have to file a return on disability income?” is different from the question, “Do I have to pay taxes on disability income?” They are two separate questions.
Is SSI Disability Taxable?
No. Ingreso de Seguridad Suplementario (SSI) is a needs-based governmental assistance program and is not considered taxable income by the IRS.
If you need to know the answers to:
- Is SSI considered taxable income?
- Do I have to file a tax return for SSI income?
SSI will never be taxed. However, even though the SSI is a non-taxable program, if you also receive any other form(s) of income and/or qualify for refundable tax credits, you still are required to file a federal tax return.
How Is Social Security Disability Taxed?
When taxed, SSDI is taxed as ordinary income but not as payroll income.
You pay tax on SSDI income at your marginal federal tax rate.
SSD does not incur additional taxes such as:
- Social Security Tax
- Medicare Tax
How Is SSDI Back Pay Taxed?
Many of our SSDI clients who receive backpay are surprised to learn that they can allocate their backpay to previous tax years via the IRS lump-sum election method.
You will receive an SSA-1099 each year that documents your benefits for that year.
Back pay can dramatically increase your taxable income, and I’ve had clients panic over the 1099 they received the first year and subsequently find out that their tax liability was negligible after appropriate allocation.
Should I Have Taxes Withheld From My Social Security Disability?
You can request voluntary withholding using IRS Form W-4V. You can withhold:
- 7%
- 10%
- 12%
- 22%
Should you have taxes withheld? If you have:
- other income
- during the tax year
- think you will cross tax thresholds
Then, withholding may be in your best interest. Most Washington state SSDI recipients do not withhold taxes from their benefits.
Does Social Security Disability Count as Income?
Of course, SSDI qualifies as income for eligibility for federal income taxes. With some caveats:
- no “Earned Income”
- doesn’t qualify as pay earned for work performed
- also does not count against payroll tax obligations.
Receiving SSDI can affect your on-going entitlement to particular programs and/or services.
What Are the Negatives of Social Security Disability?
SSDI is considered to be a federal income and classified as earned (it is not made from employment income). Disability has the following negative sides:
- Income limits – if you attempt to work while receiving SSDI, you may have problems returning to work.
- There is a risk of having a time when your benefits will stop because of CDR.
- You could have a taxable income if you exceed a certain amount of Social Security benefits.
- Approval timelines for SSDI can take a lot of time.
In Washington State, SSDI does provide the most financial stability for the disabled.
Is It Better to Retire or Go on Disability?
Whether you will be better off for retirement or permanently disabled depends on your age and the severity of your disability. If you are under retirement age and qualify for SSDI:
- The computation of your SSDI benefit uses the amount of your monthly benefit for your full retirement age (FRA) and there are no penalties for retiring before full retirement age.
- If you retire prematurely or at age 60 or younger, you are subject to the 20% to 30% penalty for all of your retirement benefits.
Federal law treats both SSDI and Social Security retirement as federally taxable income. For many people, SSDI is a better financial option than early retirement.
How to Avoid Paying Taxes on Disability (Legally)
Tips to Keep Your Taxes Low With a Disability (Legally):
You cannot conceal your income, but with good financial planning, you may be able to lessen your tax burden.
Some examples include:
- Filing separately when it will be beneficial for you
- Managing your withdrawals from any retirement accounts
- Spreading out the distribution of any back pay that you may have received
- Coordinating your spouse’s income planning with each other
Many times, we work with tax professionals when clients have disabilities and other issues like settlements that may cross over into each other.
Does Social Security Disability Last for Life?
It will not automatically last forever, but you will receive it as long as you continue to be disabled or until you reach your full retirement age. At that time, your social security disability will change over to retirement benefits and at that time, the Social Security Administration does periodic continuing disability reviews.
Case Study: Social Security Disability Benefits Secured in Washington
By a Social Security Disability Attorney at Russell & Hill Law Firm
For almost 2 years, a disabled worker was waiting for the Social Security Administration to approve his Social Security Disability Insurance (SSDI). Over that time period he also accrued a large amount of debt related to his medical care, as well as concern over whether he would be subject to income tax on his SSDI when he was awarded those benefits. After his doctor documented, in writing, his numerous limitations due to his spinal cord injury and other medical conditions, the claim was denied. Our client was uncertain of his financial future.
Russell & Hill Law Firm reviewed the medical file, background employment record, and SSA earnings record. The firm obtained new supporting medical information including doctor letters, functional capacity testing and vocational reports indicating that the client will not be able to perform substantial gainful activity under federal disability law. Russell & Hill Law Firm also explained how Social Security Disability has neither taxable income nor taxable income limits under federal law and how Washington State does not tax Social Security.
Result
Russell & Hill Law Firm was able to obtain a timely award of retroactive SSDI benefits, monthly continuing SSDI benefits, as well as clarification on whether or not the client will be subject to future federal income tax on Social Security Disability benefits. The above results gave our client financial stability, provided more certainty to the client regarding the taxability of his SSDI benefits than he had previously, and enabled our client to concentrate on medical recovery and long-term financial stability.
Speak With a Washington Social Security Disability Lawyer Today
The office of Russell & HillLaw Firm has provided reliable representation to disabled people across Washington State for more than 20 years. Our team of highly-skilled attorneys specializing in social security disability in Washington State fights aggressively for your rights and help navigate you through the approval process. We also help individuals understand whether federal law applies to the taxation of Social Security Disability.
If you are unsure if you owe taxes on your SSDI benefit, contact us at 800-529-0842 to schedule a consulta gratuita with one of our social security disability lawyers in Washington State.
Preguntas frecuentes
Is my SSDI taxable?
Your total amount of income determines whether or not your SSDI is taxable. If your combined income is higher than the federal limits, there is up to an 85% chance that your SSDI will be taxed.
Do SSDI recipients have to file taxes?
It is possible that you will owe taxes on SSDI. Where you file will depend on your total income and not just your social security benefits. There are exceptions to this rule; it is always best to contact the IRS for assistance.
Is SSDI back pay taxable?
Back payments for SSDI can be taxable as well, but you are allowed to apply the money you receive from your back payment to your taxes in the previous year.
Is SSI disability taxable?
No, SSI disability benefits are not taxable income at the federal level. Supplemental Security Income (SSI) is a needs-based program, and recipients do not owe federal taxes on payments received.
Do I have to pay taxes on Social Security disability if it’s my only income?
Generally, the answer is no. If you are receiving SSDI as your only form of income and your total is below the IRS limits, you should not expect to remit federal taxes on that income.
