How Social Security Benefits Are Taxed

The attorneys at Powell Law have represented the disabled in Social Security Disability cases since President Eisenhower made disability insurance available in 1956. At Powell Law, we effectively assist clients throughout the entire Social Security Disability claims process. If you are disabled, you should consult with an experienced disability attorney.

Recipients of social security benefits are subject to taxation at the federal level. The taxable portion of any benefits included in a recipient’s income used to calculate income tax liability is dependent on the recipient’s total amount of income and benefits for the taxable year.

If a benefit recipient is married and files a joint return, the incomes of the taxpayer and spouse must be combined with the amount of social security benefits to calculate the taxable portion of social security benefits. This is true despite the fact that a spouse may not have received any benefits. The spouse’s income must be added to the recipient’s income to calculate liability. Any resulting tax is calculated according to a taxpayer’s tax rate based upon a taxpayer’s level of taxable income.

No amount of Social Security disability income (SSDI) is taxable if half (50%) of this amount plus all other income is less than:

• $25,000 if the benefit recipient filed as single, head of household, or married filing separately, and lived apart all year from a spouse
• $32,000 if the benefit recipient filed as married filing jointly

Up to 50% of SSDI is taxable if the amount income is more than these amounts. Also, up to 85% of SSDI is taxable if half of SSDI plus all other income is more than:

• $34,000 if the benefit recipient filed as single, head of household, or married filing separately, and lived apart all year from a spouse
• $44,000 if the benefit recipient filed as married filing jointly
• $0 if the benefit recipient filed as married filing separately, and lived together with a spouse at any time during the year

Once most taxpayers and benefit recipients make these calculations, they find that none of their social security benefits are taxable. This is often true whether there is income derived from sources other than social security. A benefit recipient must have some other source of significant income to trigger the possibility that benefits may be taxed at the federal level. If so, a taxpayer never pays tax on more than 85% of social security benefits.

Note that supplemental security income (SSI) benefits are not subject to federal taxes. Also, Pennsylvania is one of the very few states that exclude almost every type of retirement income from taxation. Public and private pensions, railroad retirement benefits and all Social Security income are excluded from taxable income for tax purposes within Pennsylvania.

Consult the knowledgeable and experienced disability attorneys at Powell Law. Contact Powell Law at call (570) 961-0777. The consultation is FREE.