It’s that dreaded time of year again…tax season. For many of you, this year may be different from previous years. If you began receiving Social Security disability benefits in 2014 you may be wondering if those benefits are taxable. Do you have to report those earnings to the IRS? For the majority of people, the answer is No.
However, if you fall into 1 of 3 scenarios the federal government may tax you on your Social Security disability benefits. Your benefits may be taxed if:
- You are single and your total income is more than $25,000.
- You are married and you and your spouse have a total income of more than $32,000.
- You are married and file a separate tax return.
People are usually taxed on their benefits if they have other substantial income such as wages, self-employment, interest, dividends and other taxable income.
If you fall into scenario one and your income is more than $25,000 per year but less than $34,000, you would need to pay taxes on about half of your benefits. If you earn more than $34,000 you may have to pay taxes on up to 85% of your benefits.
If you fall into scenario two and your combined income is more than $32,000 but less than $44,000 you may have to pay income taxes on about half of your benefits. If your combined income is more than $44,000, you may have to pay taxes on up to 85% of your benefits.
In scenario three you will most likely need to pay some type of income tax on your benefits. The amount of combined income will determine your tax bracket.
Recipients of Social Security disability benefits, if they are taxed, usually fall into the 10-15% tax bracket. That means you would only pay about 10-15% taxes on up to 85% of your benefits.
If you fall into one of these three scenarios you may choose to have federal taxes withheld from your benefit check. To do this you would need to complete a W- 4V form and return it to your local Social Security office. Each January you will receive a Social Security benefits statement. This is form SSA-1099 and shows the number of benefits you received for the previous year. 1099 will be used to determine your taxable amount.
If you are unsure as to whether your benefits are taxable you should call your social security disability attorney. Or, go straight to the source and call your local social security office.
