Are Social Security Disability Benefits Taxable?

Mar 21, 2016
by Adler Markoff & Associates

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    Are Social Security Disability Benefits Taxable?

    With tax season upon us, we are getting a lot of questions regarding whether or not Social Security benefits (SSD) are taxable. For those who are awarded disability benefits, it is important that they understand what may be required of them when it comes time to file taxes. Unfortunately, there is no clear cut answer. Some people are required to pay taxes on a portion of their Social Security benefits, whereas others may discover that their benefits are in fact not taxable. As you can see, the topic is rather complicated. The IRS has a great video regarding whether social security disability benefits are taxable that we encourage you to watch in order to gain a better understanding of what is expected of you when you file your taxes this year.

    Again, it is important to note that nobodies case is the same and there is not a standardized answer when it comes to whether or not Social Security disability benefits are taxable. Many people also have questions regarding disability benefits back pay and tax time. Below we will go over what, exactly, these benefits are as well as a few tips when it comes time to file your taxes.

    What Are Social Security Disability Benefits?

    Before we go any further, let’s look at what Social Security disability benefits are. Through the Social Security Administration (SSA), certain individuals who cannot work because of disability, injury, or impairment may receive payments or benefits in order to earn a living for themselves. There are two programs through the SSA that provide assistance to people with disabilities:

    • Social Security Disability Insurance (SSDI) – This program provides benefits to those who are insured, meaning people who have worked long enough and paid Social Security taxes in the past
    • Supplemental Security Income (SSI) – This program pays benefits based on financial need

    As we’ve discussed in the past, applying for Social Security disability benefits in itself can be quite an overwhelming task. The SSA will collect several different pieces of information – including medical records – to determine an applicant’s eligibility. Given the complicated nature of the application process alone, it is no wonder why there is no straight answer when it comes to finding out if your disability benefits are taxable.

    What You Need to Know When Filing Your Taxes

    The majority of people who receive disability benefits will find that this income is not taxable. This is true for both those who rely solely on their disability benefits as well as those who receive benefits in addition to another type of income. According to the SSA, most of the one-third of people who are required to pay taxes on their benefits are within the SSDI program, not the SSI program. Those who receive SSI benefits rarely have to pay taxes, in large part because if they qualify for the program, chances are they don’t make enough money to be taxed.

    To learn more about the rules pertaining to Social Security disability benefits and your taxes, please contact an attorney from AMA Law today. Our knowledgeable Social Security disability lawyers are here to answer any questions you may have regarding this subject.

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