Filing Taxes and Social Security Disability—What You Need to Know
We’re sorry we have to bring up that dreaded word—taxes. But every year, we all have to deal with federal income taxes.
If you are employed, taxes are pretty simple. Your employer deducts taxes from each paycheck and sends you a W-2 at the end of the year showing how much was withheld. You use that to file your taxes and either pay some more or get a refund.
If you are have a disability and get disability benefits from Social Security, the rules are a bit different. But filing your taxes doesn’t have to be a nightmare. Here are some key takeaways you need to know.
Will I have to pay taxes on my disability payments?
For Social Security Disability recipients asking, “Will I have to pay taxes on my disability payments?” the answer is: “It depends.”
You may have to pay federal income taxes on your Social Security benefits. This usually happens only if you have other substantial income in addition to your benefits, such as wages, self-employment, interest, dividends, or other taxable income that must be reported on your tax return.
For Social Security Disability Insurance (SSDI) recipients, if you do not make more than $25,000 a year and file as an individual head of household, or your household income is less than $32,000 per year and you file jointly with your spouse, you will not have to pay taxes on your Social Security Disability benefits.
If your income goes over those limits, a portion of your disability payments may be taxable. But you never have to pay a tax on all of your disability benefits. Regardless of your total income, you will never have to pay taxes on more than 85% of your Social Security Disability benefits.
Here’s how that breaks down:
- If you earn more than $25,000 but less than $34,000 and file as an individual, or more than $32,000 but less than $44,000 and file jointly, then 50% of your disability income will be taxable.
- If you earn more than $34,000 if filing as an individual or more than $44,000 if filing jointly, then you will need to pay taxes on 85% of your disability income.
If you are married filing separately and you lived with your spouse at any time during the taxable year, none of your Social Security Disability benefits are exempt from taxes, and up to 85% can become taxable depending on your combined income.
At tax time, you should receive a benefit statement (SSA-1099) from Social Security that shows the total amount of Social Security benefits you received in the previous year.
You should report the amount of Social Security income you received to the IRS on your federal tax return. If you misplaced or didn’t receive a Form SSA-1099 for the previous tax year, you can get an instant replacement form by using your online my Social Security account.
Supplemental Security Income (SSI) benefits are not taxed. SSI recipients do not receive a Social Security benefit statement.
Are disability benefits recipients eligible for special tax credits?
Absolutely. Special tax credits can mean extra cash to help you with expenses.
Credit for the Elderly or the Disabled is a tax benefit designed to help older adults and individuals with qualifying disabilities reduce their income taxes. This credit is available to individuals who meet specific age, income and disability criteria. Generally, the maximum credit amount ranges from $3,750 to $7,500. Click here for an online IRS questionnaire to determine your eligibility for this tax credit.
Child Tax Credit. This is a tax benefit that helps families who are raising children. For the 2025 tax year, the Child Tax Credit (CTC) is worth up to $2,200 per eligible child, provided that each child meets residency and dependency tests, and has a valid Social Security number. Up to $1,700 can be received as a refund if the credit exceeds your tax liability. You need at least $2,500 in earned income to qualify for the refundable part. The CTC is a credit against taxes owed, not monthly payments like some past years. To determine eligibility and claim the CTC, use the IRS Interactive Tax Assistant.
Earned Income Tax Credit. The EITC provides low-to-moderate-income workers and families with a tax break. If you qualify, you can use the credit to reduce the taxes you owe and maybe increase your refund. You can get money back even if you don’t owe taxes. The EITC amount you might get generally depends on your earned income and the number of your qualifying children. Like the CTC, if you meet the qualifying rules, receiving SSDI or SSI benefits doesn’t affect your eligibility for the EITC. To claim the EITC, you must file a federal tax return. To learn more about the EITC, including basic qualifications, navigate to the IRS Earned Income Tax Credit webpage.
However, don’t let the EITC torpedo your disability claim. If you (or your tax advisor) report more earnings than you actually received from work, that may negatively affect your disability claim and could be a violation of the law.
How can you get free help in preparing your taxes?
For individuals with disabilities, the Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $67,000 or less annually. Those who are elderly or are limited-English-speaking taxpayers who need assistance in preparing their own tax returns are also eligible for VITA services.
IRS-certified volunteers provide free basic income tax return preparation with free electronic filing to qualified individuals. They provide assistance at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations. Visit the IRS website during tax season (Jan.-Apr) to find a VITA site near you.
Tax season doesn’t have to be a stressful time of year. And for many people, it’s an opportunity to claim additional money.
Please note that this article gives general income tax guidance but should not be used as tax advice in individual cases. Nash Disability Law is a team of Chicago disability lawyers who help people win disability benefits. For tax questions, you should always seek guidance from a competent tax professional.
