Are Social Security Disability Benefits Taxed?

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With tax season around the corner, you may be wondering if your disability benefits can be taxed. It is important to know that although Michigan imposes a state income tax, it has made Social Security benefits fully exempt from tax liability. In addition, Supplemental Security Income (SSI) is not taxed.

However, you still may be required to pay taxes to the IRS due to certain circumstances. Most SSD beneficiaries do not pay taxes because they do not have other sources of income. Those SSD beneficiaries who must pay taxes generally have another source of income or have a spouse with a certain amount of income, if filing jointly.

How Do I Know if I Need to Pay Taxes on Benefits?

Individuals can have up to $25,000 in income each year without paying taxes. Once that income reaches $25,000- 34,000, up to 50% of an individual’s benefits can be taxed. Yet, if you file as an individual and make more than $34,000 a year, up to 85% of your disability benefits can be taxed.

Those who file jointly can have up to $32,000 in combined income before they pay taxes. For those who make $32,000 -44,000, up to 50% of their benefits will be taxed. In addition, those who make more than $44,000 when filing jointly will be taxed on up to 85% of their benefits.

Those who are obligated to pay taxes on their benefits are not taxed at the same amount of their limits, but rather at the marginal rate. This means that most people in this situation would pay taxes of 15 -25 percent on 50-85 percent of your benefits, unless your tax rate is higher, in which case you may be taxed at a rate of 35 percent.

Taxes on benefits may be confusing, which is why it is helpful to speak with your skilled disability attorney about any questions you may have.

The Disability Attorneys of Michigan Can Help

Disability Attorneys of Michigan work hard every day helping the disabled of Michigan seek the Social Security Disability Benefits they need. If you are unable to work due to a physical, mental, or cognitive impairment, call Disability Attorneys of Michigan now for a free consultation at 800-701-5524.

Let Michigan’s experienced Social Security Disability law firm help you get the benefits you deserve.

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I will never forget you and the hard work you did to secure my Social Security Disability benefits. Thank you!

- Christine C.