If you need to apply for Social Security disability benefits or VA disability benefits, you may be wondering: Are Social Security and VA disability benefits taxable? The answer is “it depends.” You will probably need to be advised by a Mobile Social Security disability attorney.
If you receive benefits from the Department of Veterans Affairs (VA), your basic military retirement pay, based on your length of service or age, is taxable for federal income tax purposes.
However, military disability benefits from the Department of Veterans Affairs are not taxable, so you don’t have to list these benefits as income on your tax returns. Tax-free VA disability benefits may include the pension payments for disabilities paid to veterans or their families.
Are Social Security Disability Benefits Taxable?
What is and isn’t taxable is clear-cut when you receive VA benefits, but if you are receiving Social Security disability benefits, your tax situation may be more complicated.
The Social Security Administration (SSA) offers two different disability benefit programs: Social Security Disability Insurance (SSD) and Supplemental Security Income (SSI). If you receive Supplemental Security Income benefits, those benefits are not taxable.
However, if you receive Social Security Disability Insurance benefits, those benefits may be taxable if you receive income from other sources and if that income places you above a particular income threshold.
What Are the Details About Taxes and SSD Benefits?
Social Security Disability Insurance benefits may in some cases be taxable if you receive other income (tax-exempt interest or dividends, for example) or if your spouse earns income. If you have other income, you should know the threshold amounts for SSD benefits becoming taxable.
Up to 85 percent of your SSD benefits may be taxable if half of your benefits, when combined with all of your other income, exceed the following income thresholds based on your tax filing status:
- $25,000 if you are single, a head of household, or a qualifying widow or widower
- $25,000 if you are married, you are filing separately, and you did not live with your spouse during the tax year
- $32,000 if you are married and you are filing jointly
- $0 if you are married, you are filing separately, and you lived with your wife or husband at any point in the tax year
If You Are Single – or Married and Filing Jointly
If you are married and you file jointly, you may report up to $32,000 of income before you are required to pay taxes on your SSD benefits. If you earn more than the following limits for the following tax filing statuses:
- As a single filer, you may need to include up to half of your benefits in your taxable income if that income falls between $25,000 and $34,000. Up to 85 percent of the benefits must be included on your tax return if your total income exceeds $34,000.
- For married couples who file jointly, you pay taxes on up to half of the SSD benefits you receive when your total household income falls between $32,000 and $44,000. You pay taxes on up to 85 percent of the disability benefits if your total income exceeds $44,000.
If any of your benefits are taxable, and even if your spouse did not receive any benefits, you must add your spouse’s income to your own when calculating a joint return.
About Completing Tax Forms
The net amount of benefits that you receive from the SSA should be entered in Box 5 of Form SSA-1099 (Social Security Benefit Statement). Enter that amount on line 6a of Form 1040 (U.S. Individual Income Tax Return) or Form 1040-SR (U.S. Tax Return for Seniors).
The taxable portion of the benefits included in your income and used to calculate income tax liability depends on the total amount of your income and benefits for the taxable year. Enter the taxable portion of your Social Security benefits on line 6b of Form 1040 or Form 1040-SR.
Who Is Eligible for Social Security Disability Insurance?
To receive SSD benefits, you must be unable to work because of a medical condition that has lasted or is expected to last a year or to result in death. The amount of your SSD benefits depends on your average lifetime earnings before you became disabled.
Generally speaking, the more you earned and the longer you worked, the more you’ll receive in benefits, up to a maximum amount. The SSA calculates your disability benefits based on your past earnings that were subject to the Social Security tax.
In most cases, if you receive VA benefits or Supplemental Security Income, these benefits will not reduce the amount of your Social Security Disability Insurance payment. However, receiving SSD payments may reduce your SSI payments if you receive SSI benefits.
Do You Need Disability Benefits?
A disabling injury or illness can happen at any time, to anyone, and as we get older, the risk of disability increases. You are twice as likely to be eligible for SSD benefits at age 50 as at 40, and twice as likely again at age 60 as at 50.
If you apply to the SSA for SSD or SSI benefits, submit your claim as quickly as possible after you have been disabled. There are deadlines, and if you wait to apply, you’ll lose some of your benefits.
A Mobile Social Security disability lawyer will guide you through the application process so that, if your disability benefits are approved, you’ll start receiving payments promptly. If you’re eligible for SSD or SSI, your attorney will know what steps to take to win the benefits you need.
Can You Appeal If Your Application for Disability Benefits Is Denied?
Initial applications for SSD or SSI disability benefits are typically denied. When you’re notified of a denial, don’t give up. The deadline for filing an appeal is sixty days from the date of your application’s denial, but every day you wait is a day that you’re not receiving benefits.
Most applicants who are approved for SSD or SSI disability benefits are approved on appeal. If you are not already working with a Mobile Social Security disability attorney, ask an attorney to file an appeal on your behalf if you are denied SSD or SSI disability benefits.
Applying for disability benefits or appealing a denial of benefits takes time, and even upon approval, it will take several weeks for the first payment to arrive, so if you need disability benefits, start now, and reach out to a Mobile Social Security disability lawyer today.