Many disabled individuals are surprised to learn that their Social Security Disability (SSD) benefits may be taxable, depending on their situation. In fact, while Ohio doesn’t tax SSD benefits at the state level, roughly one-third of all current beneficiaries will end up paying federal taxes, according to the Social Security Administration.
However, as with all things involving the Internal Revenue Service (IRS), determining whether you will actually have to pay taxes can be a complex process involving many factors, including the level of benefits you receive as well as the amount of non-SSD income you earn.
Navigating the complicated IRS rules
According to the most recent IRS publication, the first step to determining whether you owe taxes on your SSD benefits is to add up the following: one-half of your SSD benefits plus all other sources of income. If this number is too large, your benefits will be taxable. For instance:
- If you file your taxes as an “individual” and one-half of your SSD benefits plus all other income is more than $25,000, you will have to pay taxes on your benefits.
- If you are married filing jointly and one-half of your SSD benefits plus all other income for both spouses is more than $32,000, you will have to pay taxes on your benefits.
- If you are married filing separately and do not live with your spouse at any time during the entire taxable year, and one-half of your SSD benefits plus all other income is more than $25,000, you will have to pay taxes on your benefits.
- If you are married and file your taxes separately, and you live with your spouse at any time during the taxable year, you will typically have to pay taxes on your benefits.
I make too much, so how much will be taxed?
If it turns out that you have to pay taxes on your SSD benefits, it is important to be aware that the taxable amount may fluctuate a great deal depending on how much you make – the greater your income, the greater the taxable part of your SSD benefits.
For example, while up to 50 percent of your SSD benefits may be taxable once you meet the income limits discussed above, it can spike to 85 percent if:
- You file your taxes as an “individual” and one-half of your SSD benefits plus all other income is more than $34,000.
- You are married filing jointly and one-half of your SSD benefits plus all other income is more than $44,000.
- You are married filing separately and you lived with your spouse at any time during the taxable year.
Have questions? Help is available.
If you are disabled and no longer able to work, you need a dedicated Social Security Disability law firm on your side – you need the Philip J. Fulton Law Office. Call us today and we will answer any questions you may have about SSD claims and appeals. Don’t delay, act now.