SSDI is a federal program in the United States that offers financial aid to individuals who cannot work because of a qualifying disability.
Operated by the Social Security Administration (SSA), SSDI is a type of social insurance that workers fund through payroll taxes.
To be eligible for SSDI benefits, individuals must meet the SSA’s criteria for disability.
Approximately 40% of individuals receiving Social Security benefits are required to pay federal income taxes on them.
This typically occurs when you have additional significant income besides your benefits. Significant income comprises wages, self-employment earnings, interest, dividends, and other taxable income that needs to be included on your tax return.
Obviously, taxes will impact the final amount received.
If you file a federal tax return as an individual and your combined income falls between $25,000 and $34,000, you will be required to pay taxes on your Social Security benefits according to the rules set by the Internal Revenue Service (IRS).
For this situation, you might need to pay income tax on as much as 50 percent of your benefits.
If your income exceeds $34,000, a portion of your benefits could be subject to taxation, potentially up to 85 percent.
If you file a joint return with your spouse and your combined income falls between $32,000 and $44,000, the same rules will apply.
When dealing with this situation, it’s possible that you’ll need to pay income tax on a portion of your benefits, potentially up to 50% or even 85% if the amount goes over $44,000.
Unlocking Benefits: Tax Credits and SSDI/SSI Compatibility
You may qualify for the Child Tax Credit and the Earned Income Tax Credit, and receiving SSDI or SSI does not impact your eligibility. Similarly, receiving these credits will not impact your eligibility for SSDI or SSI.
These credits will either reduce the amount of taxes you owe or boost your tax refund. Nevertheless, you must submit a tax return to receive them, and these credits could be distributed as tax refunds.
Many SSDI and SSI recipients have the opportunity to receive extra funds by submitting a federal tax return along with the necessary forms.
