Are Taxes Taken Out of Disability Benefits?

On This Page

1. Limits on How Much You Can Earn Without Paying Taxes
2. Social Security Disability Insurance Back Pay and Taxes
3. Taxes and Supplemental Security Income
4. Retain the Services of Berger and Green Today for Help with Your Disability Claim

REVIEWED BY

C. William Kenny

January 01, 2024

Board certified by National Board of Trial Advocacy

Taxes are not taken out of disability benefits – whether it’s for Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). The Social Security Administration (SSA) will never automatically withhold taxes. In fact, in many cases, you do not have to pay federal income taxes on these benefits at all. Pennsylvania also does not tax SSDI or SSI benefits.

However, if you receive SSDI benefits and also have substantial additional income from investments and rental property, you may need to pay taxes. There are limits on how much you can make without filing taxes. Additional income can push you over this limit.

Limits on How Much You Can Earn Without Paying Taxes

According to the SSA, about a third of all retirement and disability recipients must pay taxes on their benefits. This taxation happens because they make additional  income above and beyond their SSDI benefits.

Withholding Taxes for Disability Benefits

If you believe you may need to pay taxes on your disability benefits, you can ask the SSA to withhold a percentage of your monthly payment. This instance works in the same way as an employer withholding taxes from your check. Doing so is not a requirement but may be a good idea if you worry about putting enough aside to pay your taxes at the end of the year.

Social Security Disability Insurance Back Pay and Taxes

If you are like most people who qualify for Social Security disability benefits, the SSA initially denied your claim. You had to file an appeal to receive an approval during the appeals process. This outcome means you may also receive a lump sum payment for back pay. Such a payment would cover the period between when you applied and when the Social Security Administration approved you for benefits.

Because the appeals process can take well over a year, back pay may be significant. This money may be taxable because it exceeds the allowed limits. Also, the amount may move you into the next tax bracket. This transfer means you may pay a higher percentage in taxes the year you receive back pay.

How Our Social Security Lawyers Can Help You with Back Pay

As mentioned, it is not uncommon for your initial claim to be denied. However, that doesn’t mean it’s not daunting – it might put you in a tight spot. If you are experiencing a similar situation, our lawyers can fight to get you the backpay you need to help cover your expenses.

You can rely on us to:

• Act as a messenger between you and the SSA
• Help you comply with deadlines
• Advise and explain your options
• Assist you throughout the appeals process

In reference to the last point, the appeals process can be complicated, and taking it on by yourself is no easy task. A lawyer on our team can represent you throughout all stages:

• Reconsideration
• A hearing in front of the Administrative Law Judge (ALJ), which can be done via phone, video conference, or in person
• The Appeals Council
• Federal Court

Taxes and Supplemental Security Income

You should not have to pay taxes on your SSI benefits. These need-based benefits only go to individuals who have an extremely low income and few assets. If you met the guidelines for someone who had to pay taxes on their disability income, you would not meet the qualifications for this program.

In addition, the Social Security Administration never issues SSI back pay as a lump sum. Instead, it pays it in installments spread several months apart.

Retain the Services of Berger and Green Today for Help with Your Disability Claim

At Berger and Green, our Social Security disability attorneys can help you understand the laws that apply to your Social Security benefits. Our staff will address any concerns you may have about the amount of your benefits.. We can also help you fight a denial of benefits or represent you by reviewing your application.

Reach out to our office today at (412) 661-1400 for your free case evaluation, and to discuss your case with a member of our team. Our team works on contingency, so no upfront or out-of-pocket payments are required, as the attorney’s fees come out of your financial award.