22 Jul Disability Benefits and Tax
For individuals who have been diagnosed with a disabling condition, benefits through the Social Security Administration (SSA) are often critical for financial security. However, these disability benefits may be subject to federal income tax, which can impact the actual amount individuals realize as their take-home benefit.
When are Disability Benefits Taxed?
Disability benefits through the SSA (known as Social Security Disability Insurance, or SSDI) are usually only taxed if the recipient has a substantial income.
For a person who files an individual federal tax return, he or she may have to pay tax on up to 50% of their benefits if their combined income is between $25,000 and $34,000. If their combined income is greater than $34,000, up to 85% of their benefits may be taxed. Combined income is the total of adjusted gross income, nontaxable interest, and one-half of Social Security benefits.
If an individual files a joint federal tax return and the combined income of that person and his or her spouse is between $32,000 and $44,000, they may be taxed on up to half of their disability benefits. If their combined income is greater than $44,000, up to 85% disability benefits can be taxes.
Ordinarily, a married individual filing a separate return from their spouse will have to pay taxes on their disability benefits.
Making Tax Payments
For SSDI, the SSA sends a Social Security Benefit Statement (Form SSA-1099) every January to individuals who received benefits. This statement informs the beneficiary of the benefit amount that he or she received in the previous year. This amount is used by the individual to determine whether the benefits they received are subject to being taxed when they fill out their federal income tax return. For individuals who need to pay tax on their benefits, they may either make estimated payments each quarter to the Internal Revenue Service (IRS) or elect to have their federal taxes withheld from their benefits.
Obtaining Benefits for Disability
SSDI is available to individuals who have a sufficient work history and suffer from a medical condition that has or is expected to last, for one year or that will result in death. A sufficient work history is based upon the number of years an individual has worked, relative to the individual’s age. For example, an individual who is 30 years of age will generally need to have a work history of at least two years to qualify for SSDI. These benefits are often crucial for individuals who are unable to work because of their medical condition.
If you would like more information related to disability benefits, speak with an experienced disabilities law attorney today. At the Klok Law Firm LLC, we have helped numerous individuals secure much-needed disability benefits. We look forward to putting our knowledge and expertise to work for you.