If My Only Income Is From Social Security Disability Benefits Do I Have to File a Tax Return?

by Tom Streissguth

    Social Security disability pays monthly benefits to those whose medical condition prevents them from working. The IRS has a different set of tax rules for Social Security benefits, whether for retirement or disability. You may need to file a tax return, and report and pay taxes on the benefits, even if you earn no income from any other sources.

    Taxes on Benefits

    If you earn only Social Security disability benefits, chances are good that you won't owe the IRS anything, and won't need to file a return, as long as you have no other sources of income, such as an interest-bearing savings account or rental property. The IRS taxes a percentage of your Social Security benefits depending on your income level and filing status. For single filers, you must earn at least $25,000 of "combined income," which includes taxable wages, interest, dividends, pensions, and half of your Social Security benefits. If you file a joint return, this minimum rises to $32,000. Since the average Social Security disability benefit in 2013 stood at about $1,100, most beneficiaries without other income pay no federal income taxes.

    Married Filing Separately

    The IRS applies an important exception to taxpayers filing a separate married return who also lived with their spouse at any time during the year. In this case, 85 percent of your disability benefits would be taxable, even if you earned no other income. This rule prevents married taxpayers from evading taxes they would have to pay if they also had to account for income from a spouse.

    Back Pay

    The lengthy approval process for Social Security disability means that if you finally win approval, the agency may owe you retroactive pay for the period of time you were disabled -- and waiting for a decision. Back benefits paid to you by Social Security may put you over the minimum income threshold, even if you earn no other income. The IRS requires you to declare this income in the year you receive it, even if the back benefits are actually being paid for disability you had in an earlier year. You do a separate calculation for the taxable portion of these previous-year back benefits; depending on the prior year's income, this may lower the amount of your benefits that are taxable.

    Refundable Credits

    Even if you owe no taxes, you may be due a refund if you can claim certain tax credits. These include the credit for being disabled if you received benefits from an employer insurance or pension plan. In addition, the IRS offers a credit of up to $7,500 for the costs of dependent care for a dependent or spouse, with the condition that the person claiming the credit must be working or looking for work. These refundable credits are only available if you file a tax return.

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    About the Author

    Tom Streissguth has worked for over 15 years in the legal field as a writer and legal assistant, and has authored numerous articles on Social Security disability law. He has many nonfiction and reference titles in print, including works for The Gale Group and Lerner. He holds a Bachelor of Arts from Yale University.

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