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They might be, depending on two things: the type of disability benefit you get and your overall income.
Social Security operates two benefit programs for people with disabilities: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
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SSI is cash assistance for disabled, blind and older people with low incomes and limited financial assets. Social Security administers the program, but money from the U.S. Treasury, not your Social Security taxes, pays for it. Federal SSI payments in 2023 max out at $914 a month for an individual and $1,371 for a married couple when both spouses are eligible. Those benefits are not subject to income tax.
However, SSDI is potentially taxable, coming under the same set of tax rules as Social Security retirement, family and survivor benefits.
Whether you pay taxes on SSDI benefits depends on what the Internal Revenue Service calls your “provisional income.” That's the sum of your adjusted gross income, tax-exempt interest income and half of your Social Security benefits for a given year. Here's how it works:
- If those three figures add up to less than $25,000 for an individual taxpayer or $32,000 for a married couple filing jointly, you won't pay taxes on your SSDI.
- If your provisional income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a couple filing jointly, up to 50 percent of your benefits are subject to taxation.
- If it's more than $34,000 for an individual or $44,000 for a couple, you are taxed on 50 percent to 85 percent of your benefits.
Say you're a single filer who received the average SSDI benefit of $1,364 a month in 2022. You had a part-time job that paid $15,000, and you received $5,000 from investments and dividends. Your provisional income was $28,814 — half of your Social Security benefits plus $20,000 in other income.
You are in the category of owing taxes on up to 50 percent of your benefits, although in this example it would be considerably less: Plugging these numbers into the IRS’ online tax tool, the Interactive Tax Assistant, indicates that $1,592 of your benefits would be subject to federal income tax, at the same tax rate as other income — in this case, you're in the 12 percent bracket.