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What Social Security Disability Beneficiaries Should Know About Taxes

It’s a common misunderstanding among Social Security Disability beneficiaries that the income you receive isn’t subject to taxation. Even though your income is from the federal government, it still may be considered taxable income.

When tax time rolls around, the Social Security Administration sends beneficiaries a form SSA-1099. This will give you the information you need to file federal income taxes. For Houston residents who are currently beneficiaries and for those considering applying, there is some important information you should know about taxes and Social Security disability benefits.

Here’s the top three pieces of information our Houston Social Security disability attorneys want you to know:

Withholding Allowed

When you work a regular W-2 job, your employer will withhold certain amounts from your taxes. This limits your tax liability when April 15 rolls around, and most people end up getting a refund instead of owing taxes.

Just as your employer would from your paycheck, the Social Security Administration can withhold federal taxes from your benefits payments to simplify your taxes when you file. To have the agency do this, you will need to request that a form W-4V be completed for you.

Possible Exemptions

The IRS states that only certain beneficiaries receive taxable payments. Look at the base amount for your filing status, compare it with the total amount of your other income, including tax-exempt interest, or half of your benefits amount. Whether you are filing jointly or individually, your total income amounts, and your filing status will also be determining factors in the exact dollar amount that is taxable.

In general, beneficiaries who earn less than $25,000 a year as individuals, or $32,000 a year as a family, may not have to pay taxes on their benefits.

Filing Your Taxes

Beneficiaries are able to file individual or joint returns with a spouse. Individual filers should consider the following:

  • If combined income is between $25,000 and $34,000, you may be required to pay taxes on about half of your SSDI benefits.
  • If your income is greater than $34,000, the taxable amount can be as high as 85%.

Joint filers should note the following:

  • If you and your spouse have a combined income of $32,000 to $44,000, you could pay taxes on as much as half of your benefits income.
  • If you and your spouse have combined income of greater than $44,000, the amount of your benefits that may be taxed can reach up to 85%.

The Houston Social Security attorneys at The Law Offices Of M. Stanley Whitehead recommend consulting a tax professional as the best way to accurately determine what SSDI income you must pay taxes on.

 

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