Should I Withhold Taxes From SSDI Payments?

Other Income That Can Affect Taxes on SSDI 

Other income can change how much federal income tax you pay on SSDI. That includes all of your spouse’s income if you file jointly.

Types of income:

• Wages
• Self-employment income
• Pension payments
• Taxable traditional retirement distributions
• Taxable interest
• Dividends
• Capital gains
• Tax-exempt interest
• A spouse's income when you file jointly

Examples of Taxes on SSDI With Other Income 

These examples show how filing status and combined income affect whether you would pay taxes on your SSDI. 

SSDI With Little or No Other Income

A single filer receives $19,200 in SSDI and has no other income or tax-exempt interest.

• Half of the SSDI: $9,600
• IRS threshold: $25,000
• Result: $9,600 is below the threshold, so the SSDI would not be taxable.

SSDI Plus Wages and Interest Income

A single filer receives $24,000 in SSDI, earns $12,000 in wages, and has $10,000 in taxable interest income.

• Half of the SSDI: $12,000
• Wages and taxable interest: $22,000
• Total used for the IRS thresholds: $34,000
• Result: $34,000 reaches the higher threshold, so up to 85% of the SSDI may be taxable.

SSDI Plus a Spouse’s Wages

An SSDI recipient files jointly and receives $18,000 in SSDI. Their spouse earns $60,000 in wages.

• Half of the SSDI: $9,000
• Spouse’s wages: $60,000
• Total used for the IRS thresholds: $69,000
• Result: $69,000 is above the $44,000 higher threshold, so up to 85% of the SSDI may be taxable.

Options for Paying Federal Taxes on SSDI

If you expect to owe federal income tax on SSDI, you have these options for paying: 

• Withhold federal tax from SSDI payments: Choose a withholding percentage based on how much federal tax you expect to owe. Ask the Social Security Administration (SSA) to withhold taxes. Options and basic tax calculation below.
• Make estimated tax payments: Keep your full SSDI payment and use Form 1040-ES to make payments to the IRS during the year. . This gives you more flexibility over the amount you pay, but you are responsible for making the payments yourself.
• Pay taxes when you file: You can pay federal taxes when you file your tax return. This keeps more cash available during the year but can result in a large amount due at filing.

If you expect to owe at least $1,000 after withholding and credits, you may need to make estimated payments to avoid an IRS underpayment penalty.

You can also have taxes withheld and make extra payments if withholding won’t cover what you expect to owe.

Federal Withholding Options for SSDI Benefits

The SSA allows you to withhold taxes from your SSDI benefits at these rates:

• 7%
• 10%
• 12%
• 22%

To choose a withholding rate, first estimate how much federal tax you will owe for the year. Use last year’s tax return or the IRS Tax Withholding Estimator to estimate what you may owe this year. 

Then, subtract any federal tax that is being taken out of your wages or other income.

The amount left is what you need to cover. 

Now, look at your monthly SSDI payment and calculate how much each withholding rate would take out. Compare withholding amounts with the tax you expect to owe. 

To calculate a percentage of a payment: Payment amount × percentage = amount withheld

For example: 10% withholding on a $2,000 monthly SSDI payment would be $200 a month, or $2,400 over 12 months.

This article focuses on federal taxes, read this to learn which states tax SSDI benefits.

Starting, Changing, or Stopping SSDI Tax Withholding

The SSA lets you manage federal tax withholding through your online Social Security account. Sign in and find “Request to withhold taxes.” From there, you can start withholding, change your withholding percentage, or stop withholding.

If you don’t have an online account, you can:

1. Call the SSA at 800-772-1213 and tell the representative you want to start, change, or stop federal tax withholding.

2. Complete IRS Form W-4V, Voluntary Withholding Request, and mail it to your local SSA office or bring it in person.

Don’t send Form W-4V to the IRS or attach it to your federal tax return. The IRS issues the form, but the SSA handles voluntary tax withholding from SSDI benefits. 

Reviewing SSDI Withholding After Your Income Changes

If your income or filing status changes, your federal taxes may change too. Redo the calculation to see if you want to increase or reduce your withholding.

Consider if:

• Your filing status changes
• You start or stop working
• Your wages increase or decrease significantly
• Your spouse starts or stops working
• You start receiving pension or retirement payments
• You receive capital gains or other investment income
• You paid substantially too much or too little tax last year

If you need help estimating your tax liability or deciding how much to have withheld for taxes, review your SSA-1099, use this year’s IRS resources, or talk to a tax professional. 

You may be able to get free tax preparation through the IRS Volunteer Income Tax Assistance (VITA) or through Tax Counseling for the Elderly (TCE) if you are age 60 or older. Use the IRS VITA/TCE locator or call 800-906-9887 to find free tax help near you.

Researching SSDI Taxes But Not Approved Yet?

Did you know that around 70% of initial SSDI claims are denied but many are approved later on appeal? It’s true. We know the process can be long and frustrating.

Advocate’s disability specialists can help you:

• Build a strong disability claim
• Complete your application and forms
• Gather strong medical evidence
• Appeal an SSDI denial
• Prepare for an administrative law judge hearing
• Explain your case in court