Determining Tax on SSDI

• In most instances, you are not subject to income tax on your SSDI if your only source of income is SSDI. Generally, taxpayers who meet the income requirements are those who have substantial income in addition to their SSDI benefit payments such as annuities, pensions or capital gains. Taxpayers who do not have income in addition to SSDI are not usually subject to income tax, but to be certain, use Worksheet 1 found in IRS Publication 915 to determine what portion (if any) of your benefits are taxable. Some lump sum payments are subject to tax even if they are comprised only of SSDI.
  
  

Filing

• Social Security benefits include Social Security disability benefits as well as Social Security retirement benefits and equivalent railroad retirement benefits. If your SSDI benefits are taxable, then you can claim them using IRS form 1040 or 1040A. Generally it is best to choose the simplest tax form for your situation. Unless you are reporting a sale of property, desire to claim credits which require itemization or have self-employment income, it is best for you to file using form 1040A. Report your total benefits (found in box 5 of your SSA-1099) on line 20a of form 1040 and report your taxable benefits on line 20b. If you use form 1040A, report your total benefits on line 14 and your taxable portion on line 14b.
  
  

Caution

• Do not confuse Supplemental Security Income (SSI) benefits with SSDI. SSI benefits are paid to people who are 65 or older and blind or disabled. Although payments are administered by the Social Security Administration, benefits are paid from the general fund of the Treasury Department. Unlike SSDI, SSI payments are not taxable and should not be included on your income tax return.
  
  

Considerations

• Although it is true that you are probably not required to file if SSDI is your only source of income, it is also true that it may be in your best interest to file even if you are not required to file. For example, if you had federal tax withheld from your income but did not meet the filing requirements, then you should file so that you are refunded your federal tax paid. In addition, some refundable credits could result in a refund for you even if you are not required to file an income tax return.