Do I Pay Taxes on My Social Security Benefits?

Disabilities can take a physical and mental toll on you, which can be daunting and have long-term impacts on your quality of life. Fortunately, if you have a disability that hinders your ability to work, you could potentially qualify for Social Security Disability benefits. Before applying, you may wonder if you have to pay taxes on your Social Security benefits – and our devoted SSDI attorneys are here to answer that question for you.

Financial Considerations: Navigating Federal Taxation

If you are currently receiving or plan to receive Social Security benefits (either SSDI or SSI), you should understand what you are expected to pay. Similarly to other Social Security benefits concerns, the answer depends on your unique case. However, some basic laws may apply across various circumstances.

Federal taxes on Social Security benefits are required for individuals who have a substantial income in addition to their Social Security benefits. This can include wages, earnings, dividends, interest, and any other forms of taxable income. To determine if you are required to pay federal taxes, calculate your combined income by adding up your adjusted gross income, nontaxable interests, and half of your Social Security income.

Individual vs. Joint Filing for Social Security Benefits

The next step is to determine if you are individually filing taxes or filing a joint tax return with a spouse. If you are filing individually and your combined income totals between $25,000 and $34,000, the federal tax rate on your benefits can be up to 50%. If your combined income is over $34,000, this rate can go up to 85%.

For those filing joint returns with a spouse, if your combined income totals between $32,000 and $44,000,  the federal tax rate on your benefits can be up to 50%. If your combined income is over $44,000, this rate can increase up to 85%.

Understanding State Differences in Social Security Taxation

While Federal Social Security taxes are straightforward, policies regarding state taxes on Social Security benefits will vary. While many states offer some exemptions based on income and age, some of them tax Social Security benefits, while others do not. These policies are gradually changing, with new states deciding to join the nationwide trend of exempting Social Security benefits from taxes. Consult your specific state tax authority for the most current information.

Talk to an Attorney If You Have Concerns Over Your Social Security Benefits Being Taxed

Cases may vary depending on your situation, so contact a tax professional if you require assistance. If you have questions regarding your Social Security benefits or the application process, contact the Jan Dils team today for a free consultation. We take cases from anywhere in the country.