One of the most common questions we get once our clients are approved for disability benefits is if their disability checks are taxable. For most people who are receiving benefits, the answer is no. Unlike SSDI which is based on the amount of Social Security taxes you paid during the years you worked as a W2 employee, SSI recipients qualify for SSI on a financial need basis by falling below the household income and asset threshold. Thus, SSI recipients rarely must pay taxes because they do not have enough income to begin with (if they had enough income to be taxed, then they wouldn’t qualify for SSI). However, for people who have other sources of household income, in addition to SSDI benefits, it is likely that their SSDI checks may be taxable.
Here is how the federal income tax system will affect you:
As for state taxes, most states do not tax disability benefits; however, a few states tax systems treat disability benefits like the federal tax system.
Please be advised that we do not specialize in tax law and do not have any staff with an accounting degree. The above information is to give you a general idea of how SSDI/SSI benefits may be taxed. To best determine how your disability income will be taxed, please seek the advice of your accountant or contact us for a referral to an accountant.