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How Is SSDI Reported on Federal Tax Return?

Written by Ankin Law Office

With the 2012 tax deadline fast approaching on April 15, 2013, many Social Security disability recipients are wondering how to report their disability benefits on their income tax returns. The following are some important things to remember at tax time:

  • Disability benefits, including Social Security Disability Insurance (SSDI), is generally taxable income that must be reported on your federal and state income tax returns.
  • If the only income you received during 2012 were your SSDI benefits, your benefits are generally not taxable and you probably do not have to file a return.
  • If you received income in addition to your SSDI benefits, generally, up to 50% of your SSDI benefits are taxable, but that amount may increase to 85% of your benefits if the total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly) OR you are married filing separately and lived with your spouse at any time during 2012.
  • You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2012 in your 2012 income, even if the payment includes benefits for an earlier year. Generally, you must use your 2012 income to figure the taxable part of the total benefits received in 2012, but you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits.
  • The IRS instructs that if you are filing Form 1040EZ, do not report any benefits on your tax return. If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a.
  • Medical expenses and other bills may be able to lower a disability recipient’s tax burden.

Because the tax laws and social security disability laws are complex, with several nuances, you may wish to consult with a skilled social security disability attorney and/or accountant when filing a 2012 tax return that includes social security disability benefits.

The knowledgeable Chicago SSDI attorneys at Ankin Law Offices, LLC focus on advising and representing clients in pursuit of their social security disability claim.  Contact our office at (312) 600-0000 to you any questions regarding the impact of social security disability benefits on your income tax burden.

Categories: Social Security