Tax season is finally over. Hopefully, as you are reading this, you have received a tax refund and are enjoying the benefits of that refund. Many Americans will likely not think about their taxes much until early next year when they are again compelled to file their income taxes. However, it is important to start thinking about next year’s tax season now. This is especially true if you are likely to begin receiving Social Security Disability Insurance benefits within the next year.
It is important to understand how SSDI benefits will affect your taxes so that you can plan accordingly. The tricky reality is that some SSDI benefits are taxable and some are not. In addition, some benefits are taxable at different rates depending on a number of different factors. If you have questions about the taxable nature of these benefits, you can certainly bring your questions to your attorney. But in the meantime, you may wish to keep the following general rules in mind.
If you receive SSDI benefits this year, you will receive a Form SSA-1099 from the federal government early next year. This document will detail the total amount of the benefits you received during the previous year.
In general, you will be subject to one of two base amounts, depending on your filing status. If you are married filing jointly, your base amount will be $32,000. All other filing options are subject to a $25,000 base amount. If you add half of your SSDI benefits amount with any other income you have taken in, you will receive a total that you can compare to your base amount. Any income which exceeds the base amount will be taxable. Note that this formula is a rough estimate.
Source: Fox Business, “Taxation of Social Security and SSDI Payments,” March 25, 2015