It’s a common misconception 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.
Here is what Houston residents should know about Social Security disability and taxes.
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, so most people get 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 have the agency do this, you will need to request that a form W-4V be completed for you. 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.
The IRS states that only certain beneficiaries receive taxable payments. Look at the base amount for your filing status. Compare this with the total amount of your other income, including tax-exempt interest, or half of your benefits amount.
Determining factors in the exact amount that is taxable include:
- Whether you are filing jointly or individually
- Your total income
- Your filing status
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
SSDI recipients 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, up to half your benefits could be taxed.
- If you and your spouse have combined income greater than $44,000, up to 85% of your benefits may be taxed.
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.