If you can’t work because of a disability, you may be receiving disability benefits to compensate for that financial loss. If that is the case, those benefits are probably an essential source of financial support during this difficult time. If you are receiving disability benefits, it’s understandable that you probably want to do all you can to ensure that you protect those benefits and continue receiving the maximum amount for as long as possible. You may also wonder whether the income you receive as benefits is taxed like other sorts of income. Let’s take a closer look at the law together.
What Types of Disability Income Are Available?
Depending upon an individual’s particular situation, various types of disability benefits may be available. Some are taxable, while others are not. These benefits may include:
1). Employer-funded Disability Income:
If you receive disability benefits from an employer while you are unable to work as a result of a disability, that income will typically be taxable just as would regular wages.
2). Social Security Disability:
Depending on how much other income you (or you and your spouse if you are married) earn, Social Security disability benefits may or may not be taxable. Generally, however, if Social Security disability benefits are your only source of income, your benefits will not be taxable. Although the rules regarding taxation of Social Security disability benefits may seem confusing, as a general rule, you may have to pay taxes if your total income is more than $25,000 if you’re single or married filing separately, or $32,000 if you’re married, filing jointly.
Total income typically consists of half of an individual’s disability benefits, tax-exempt interest, and other yearly sources of income. Typically, up to 50 percent of SSDI benefits may be taxable if you have between $25,000 and $34,000 in income and are filing as head of household, single, a qualifying widow or widower, or married and filing separately. For those married couples who file jointly, 50 percent of SSDI benefits are usually taxable if the income level is between $32,000 and $44,000. For those with income exceeding the threshold amount of $34,000 or $44,000, up to 85 percent of SSDI benefits could be taxable.
3). Disability Insurance Benefits:
If you receive disability benefits from a disability insurance policy, whether or not you owe taxes will typically depend upon who paid the premiums for that policy. If your employer paid the premiums, then the benefits will be taxable. By contrast, if you paid the premiums personally using after-tax money, the benefits will typically not be taxable.
Although these are the general rules regarding various types of disability income, you will still want to be sure to contact an attorney regarding your particular circumstances. Doing so will help ensure you do not pay taxes when you shouldn’t and vice versa.
The Disability Tax Credit
In some circumstances, if you are permanently and totally disabled and you have disability income that is taxable, you may be eligible for a federal tax credit for the elderly and disabled. This credit is typically available to those who have had a qualified physician certify that their particular disability prevents them from working and that the condition is supposed to last longer than one continuous calendar year or result in death. The amount of the particular credit will depend upon how much taxable income a particular individual had and how much they received in non-taxable disability benefits.
What Should You Do If You Owe Taxes on Disability Income?
If you believe that you may owe taxes on disability income, it’s always best to plan ahead to avoid a large tax bill at the end of the year. If you think you might owe federal income taxes, you can request that the Social Security Administration withhold a certain amount of benefits from your monthly SSDI checks. If you wish to do so, you can contact the SSA at (800) 772-1213 to make a withholding request or mail, fax, or make a request in person.
GCC Disability – Here For You
Having a disability that renders you unable to work can be stressful in so many ways – and especially from a financial perspective. At GCC Disability, we understand that the bills don’t stop arriving just because you’re unable to work, and we know how overwhelming that can feel. That’s why we’re here to help. While we unfortunately can’t cure your condition, we can help you pursue the benefits you need and deserve. We understand every aspect of the law regarding disability benefits, and we’ll always use the best legal strategies for your particular claim. You deserve nothing less. If you’re ready to get started, give us a call today. We look forward to helping you soon.