Are Disability Benefits Taxable? What You Need to Know

In lieu of tax season, it is important for you to understand how your disability benefits may be affected by the federal tax code.

The Great State of Florida

Florida is coined for its citrus, sunshine and scenic coasts– it’s the sunshine state of course. The good news for you is that Florida is one of eight states that does not have a state income tax which means that both Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) are not taxed at the state level.   Note that SSI benefits are never taxable at any level in any case.

Federal Income Taxes

However, on a federal level, you may be subject to pay federal income taxes on your disability benefits. This typically only happens if you are receiving additional substantial income including wages, self-employment, interest, dividends or other taxable income.

Under the Internal Revenue Service (IRS), no one is required to pay taxes on more than 85% of their Social Security benefits in federal income tax. Like any tax filings, you may choose to file as an individual, jointly or married and file separate tax returns. Whichever way you choose to file your taxes, there are specifications for your income and the percentage, if any, of your benefits that may be taxed. The following is a simple formula for calculating your combined income:

Your Adjusted Gross Income + Nontaxable Interest +½ of your Social Security Benefits

Filing as an Individual

If you are filing your federal income tax as an individual with a combined income up to $25,000 and $34,000, then you may be subject to pay income tax on up to 50% of your benefits; for those whose combined income is $34,000 and are filing as an individual, then your benefits may be taxed up to 85%.

Filing a Joint Return

If you are filing your federal income tax as a joint return and have a combined income between $32,000 and $44,000, then your benefits may be subject to income tax up to 50%. If your combined income exceeds $44,000, then your benefits may be taxed up to 85%.

Filing a Separate Return From Your Spouse

If you are married and are filing a separate tax return from your spouse, then you will likely have to pay taxes on your benefits.

The IRS will send you a Social Security Statement that highlights the benefits you received in the previous year; you will use this statement to determine if your benefits are subject to taxation.

Need Some Help?

Living in the state of Florida has its benefits; from great coastlines to the sunshine and warm climate, Florida is an amazing state to live in. One of the greatest perks for Floridians, receiving Social Security disability benefits or not, is that there is not an additional state tax to file.

While federal and state taxes are detailed by tax codes and the Internal Revenue Service (IRS), The experienced professionals at Disability Experts of Florida wanted you to know how your benefits may be affected by Florida and federal income taxes– we are here to fight for the benefits you deserve.