Can i get a tax refund if i am on social security disability

There is a saying that the only two things in life that are certain are death and taxes. As United States citizens, we are well aware of the fact that we pay taxes on the income we receive. In fact, a part of those taxes is what makes it possible for disabled workers to obtain Social Security Disability benefits. The question is, do Social Security Disability beneficiaries have to file taxes when receiving disability benefits and do they have to pay taxes on the Social Security Disability benefits that they receive?

Whether or not you actually have to file taxes when receiving Social Security Disability depends on how much income you receive and whether or not your spouse receives an income. If Social Security Disability benefits are your only source of income and you are single, you do not necessarily have to file taxes. Doing so, however, may be in your best interests – such as the case with stimulus payments that you may not receive if you do not file taxes.

The general rule of thumb to follow is that you will have to pay federal taxes on your Social Security Disability benefits if you file a federal tax return as an individual and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total combined income that exceeds $32,000.

The good news is that you will not have to pay taxes on all of the Social Security Disability benefits that you receive if you do fall within one of the above tax brackets. If you file a federal tax return as an individual and earn between $25,000 and $34,000 for the year, you may be responsible for paying income tax on 50 percent of the amount you received from the Social Security Administration (SSA). If your income is more than $34,000, then you may have to pay taxes on up to 85 percent of your Social Security Disability benefits.

If you file jointly with your spouse, you may have to pay taxes on 50 percent of your Social Security Disability benefits if you and your spouse have a combined income of between $32,000 and $44,000. If you and your spouse have a combined income of more than $44,000, then up to 85 percent of your Social Security Disability income may be taxed. The good news is that you will never have to pay taxes on more than 85 percent of your Social Security Disability earnings.

It is in your best interests to file jointly with your spouse. If you file as married filing separately, you will likely have to pay taxes on some portion of your Social Security Disability payments.

The SSA is not obligated to withhold taxes from your Social Security Disability payments. If, however, you feel that you are going to owe taxes on your Social Security Disability benefits you can contact the SSA and ask them to withhold taxes for you if you prefer your tax situation be handled through tax withholding. In order to do this, you will need to contact your local Social Security Office in order to set up tax withholding arrangements.

The article below is accurate for tax years prior to 2018. Some tax information below has changed for your 2018 and later tax returns. Learn more about tax reform here.

Video transcript:

Hello, I’m Jill from TurboTax, with important news for taxpayers who receive disability income.

If you are wondering whether you can still file a tax return despite receiving some type of disability income, rest assured that the IRS will always accept your return—even if it reports zero taxable income.

On the other hand, you shouldn’t assume that all forms of disability income are tax free and that you don’t have to report it on a return. But even if you find that your disability income is taxable—it doesn’t automatically mean that you have to file a tax return.

The first thing you should determine when deciding whether to file a tax return is if your disability income is taxable.

If you receive a disability pension from a private plan that your former employer pays for, all of your disability pension income is likely to be taxable.

• And if you receive Social Security payments for your disability, some of these payments may be taxable if you earn additional income during the year.
• However, don’t confuse this with supplemental security income or SSI payments you receive for your disability—those are not taxable.

Other forms of disability income that aren’t taxable include:

• Payments you receive under a workers’ compensation statute or from the Department of Veterans Affairs.
• Usually, you can also exclude from your tax return other government disability payments you receive because of an injury or sickness you suffer while working for certain government organizations, such as the Foreign Service.

In the event some or all of your disability income is taxable, your next step is to assess whether filing a tax return is necessary.

• You are only required to file a tax return when your total income—excluding tax-exempt disability benefits—is at least equal to the sum of one personal exemption and the standard deduction for your filing status.
• This means that even if your disability benefits are subject to tax, if the amount is below this threshold, you don’t have to file a return or pay any tax on it.

If you do end up paying tax on your disability income and you are retired on permanent and total disability—you should determine if you are eligible to take the tax credit for the elderly and disabled to reduce whatever tax you might owe. A tax credit can be extremely valuable since it reduces the tax you owe on a dollar-for-dollar basis.

Remember, when you use TurboTax to file your tax return, we’ll ask you simple questions and recommend the best filing status for you.

Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.