Are Social Security Benefits Taxable?

Tax season is officially upon us! Filing taxes can be challenging enough as-is without factoring in your Social Security disability benefits income. If you have additional income putting you in a specific financial bracket that’s higher than the IRS threshold, you may find that any benefits over that limit are taxable. Overwhelming, right? So…are Social Security benefits taxable? Keep reading to learn how this is determined.

How Social Security Benefits Work

The Social Security Administration was created in the 1930s as part of government reform. Disability benefits were added to the program in the 1950s to help Americans with disabilities who are unable to work obtain a livable income. The Social Security Administration (SSA) maintains very strict criteria for individuals to be able to apply for and receive disability.

The SSA states that your condition must severely limit your ability to perform basic activities that could be necessary for a work environment – things such as standing, walking, sitting, lifting or retaining information – for at least one year. Your condition must prevent you from performing the kind of work you did prior to your disability and also prevent you from performing other types of work.

To receive Social Security disability benefits, you must either be working very little, with a monthly income under the limit set by the SSA ($1,260 as of 2020) or not able to work at all.

Are Social Security Benefits Taxable?

Getting taxed on Social Security disability depends on the amount of your total income and whether or not it exceeds the threshold set by the IRS. If you are married and jointly file your taxes, the threshold is $32,000; if you are single, the threshold is $25,000.

REMINDER: Total Income = ½ of Total Disability Benefits + ALL Other Sources of Income

If your total income is below the threshold, you will likely not get taxed. If your total income is above the threshold, you should expect (and plan for) tax requirements.

State-Specific Taxes

States in the U.S. for the most part, including Maine, do not tax Social Security disability benefits. Other states do tax disability income to some degree, with a criterion that is very similar to what’s used by the IRS. States that tax includes:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • North Dakota
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

Contact the Experts

Before you make any decisions, you will want to speak with a financial advisor who can help you determine what tax requirements to expect.

If you have questions about Social Security disability benefits or your current taxable status, don’t feel overwhelmed. To learn more about Maine disability requirements, contact the professional disability attorneys at Woodruff & Mathis today and let us help you with your disability benefits process.