Are My Social Security disability benefits taxable?

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A:

Social Security disability benefits may be taxable if you receive other income that places you above a certain threshold. The majority of Social Security disability recipients, however, do not have to pay taxes on that income. The reason is that most people on disability have little to no other income.

How Social Security Disability Works

President Franklin Roosevelt created the Social Security program as part of his New Deal government reform of the 1930s. The purpose of the New Deal was to help lift the country out of the Great Depression and provide a social safety net for elderly citizens and those with disabilities that prevented them from making a normal living.

The majority of Social Security recipients fall into the former category. They have reached retirement age, where the minimum age to collect benefits is 62, and receive a monthly Social Security check based on the amount they paid into the program during their working years.

Social Security disability recipients do not have to be a certain age to receive benefits. Instead, their disability must meet certain criteria established by the Social Security Administration, or SSA. The condition must be severe. It must prevent a person from doing the work he did previously, and it must be determined, based on age, education, experience, and other factors, that the person would have difficulty training for a new career.

Additionally, the recipient must presently not be working, or working so little his monthly income is under $1,090. The specific type of disability must be included on the SSA's approved list or otherwise judged to be of equal severity to a condition on the list.

When Disability Benefits Are Taxed

Whether disability benefits are taxed depends on your total income. To avoid taxation, your total income — determined by adding one-half of your disability benefits to all other sources of income including tax-exempt interest — must fall below the threshold set by the SSA.

If you are single, the threshold amount is $25,000. If you are married and file jointly, it is $32,000. If you are married and live with your spouse but file separately, the threshold is $0, meaning at least some of your benefits are taxable.

State Taxes on Disability Benefits

Most states do not tax Social Security benefits, including those for disability. As of 2015, however, a total of 13 states still tax benefits to some degree. These states are Minnesota, Montana, Missouri, Nebraska, Colorado, Connecticut, Kansas, Utah, Vermont, West Virginia, New Mexico, North Dakota and Rhode Island. Most of these states use similar income criteria to the ones used by the SSA to determine how much, if any, of your disability benefits are taxable.


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