SSDI and TaxesPosted October 27, 2014 by Premier Disability Services, LLC® Over the past couple weeks; we’ve filled you in on all sorts of processes involved with the application for SSDI benefits. We’ve also walked you through the hearing and denial processes. A common question regarding SSDI benefits is what tax implications are associated with them.
There are many rumors that circulate about the taxable amount of SSDI, including horror stories detailing that up to 85% of your benefits are taxable. While this amount is accurate in some cases, those instances are extremely rare. If you and your spouse are sharing a household but filing separate returns, it is quite possible that this rate may apply to you.
If SSDI is your only source of income for the household, your benefits may not be taxed by the IRS at all, even in large amounts. There is a table available to those who receive SSDI benefits that will detail the amount of taxes for which you will be responsible. Unfortunately, this form is not easily understood by the layman. It is recommended that you hire an accountant, even as costly as it sounds. It is thought that the benefits highly outweigh the expense in the long run.
This also includes retroactive payments. Should you receive a large amount as a result of winning your SSDI appeal case, up to a certain amount, this may not be taxed depending upon your spouse’s income. If your disability benefits are taxable, and you’ve received a lump sum settlement, you can elect to have your taxes taken for that tax year, or divide the payment into sections over a few years.
Should you be preparing to start the rather daunting process of applying for SSDI benefits, we can help. We have professionals on staff that is well versed in the complicated ins and outs of Social Security Disability Insurance benefits and denials. Check out our website for more information.