Do You Need to File Taxes If You Receive Social Security Disability Benefits?

by Rod Howell

    You do not file taxes if Social Security benefits are your only income. However, if you have other forms of income, there’s a possibility you owe taxes on your Social Security disability benefits. Depending on how much income you have, more than half of your Social Security benefit amount could be subject to taxes.

    Even if you receive Social Security benefits, you will have to file a tax return and pay taxes if you have outside income from different sources. These income sources include work wages, self employment earnings, and dividends from life insurance policies and investments. You must also file taxes if you receive nontaxable interest, such as earnings from tax-exempt mutual funds.

    You pay taxes on your Social Security disability benefits if it’s determined that your total income -- the combination of your outside income and Social Security benefits -- exceeds the Social Security Administration’s income guidelines. As of 2012, if your combined income tops $25,000 per year, 50 percent of your Social Security disability benefits are taxed at normal income tax rates. If your total income surpasses $34,000, up to 85 percent of your Social Security benefits are taxed.

    The income limits to determine the taxability of your Social Security disability benefits increase if you’re married and filing jointly. For example, if you and your spouse’s combined incomes, which include outside income and Social Security benefits, top $32,000, then 50 percent of your Social Security benefits are taxed. Up to 85 percent of your Social Security benefits are taxed if your combined incomes exceed $44,000.

    Once it’s determined that your Social Security disability and outside incomes exceed income guidelines, you must report your Social Security disability amounts on your federal tax returns for federal tax purposes. You don’t pay state or local taxes on your Social Security disability benefits. Each January, the Social Security Administration mails you a Social Security Statement, also known as Form SSA-1099, detailing how much you received in benefits the previous year. If you owe taxes, you can pay them by April 15th. You can pay federal taxes early by making estimated tax payments to the Internal Revenue Service every three months, or quarterly, throughout the previous year. You will know when you receive your statement in January if you overpaid or still owe taxes. Another option is to have federal taxes withheld from your monthly disability checks.

    Photo Credits

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    About the Author

    Rod Howell is a writer living in Charlotte, N.C. He graduated from Thaddeus Stevens College with an associate degree in administration in 2000. He published the book "Capitol Conspiracy" and regularly contributes to a blog as well as various other websites, drawing frequently from his experience as an insurance agent.

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