Main Takeaways:

The Ticket to Work Program provides incentives for employers who hire those with disabilities and for those considering working while disabled. It is voluntary for those collecting Social Security Disability Income payments.
As you earn money, your SSDI is reduced. You also must report any SSDI earnings on your W-2 form.
There is a portion of your SSDI that can be excluded from taxes.

Working While Collecting Social Security Disability

The Social Security disability program is designed to be used by people who have suffered an illness or injury that ultimately results in their facing a disability that is long-term or is expected to end in death. However, in some cases, those who are collecting disability payments may be able to work for some period of time even after they begin collecting payments.

Ticket to Work

The “Ticket to Work” is a program that provides incentives for both employers who hire those with disabilities and for those who are considering working while disabled. The program is entirely voluntary for those who are collecting Social Security Disability Income (SSDI) payments. There are some significant benefits offered to those who are disabled including a quick reinstatement of benefits should you lose SSDI benefits because you are making too much as well as extended medical benefits. For some people who are collecting disability payments, this program may help them secure work.

Taxable Income and SSDI

SSDI benefits are reduced as you earn money and when you file taxes annually, you will have to claim your W-2 or self-employed income as well as any SSDI earnings. Additionally, if you file a joint tax return, the amount of tax you may be required to pay on SSDI payments will be determined by the combined joint income on your taxes.

SSDI Tax Exemptions

The portion of your SSDI which may be excluded from taxes is as follows:

If you are single, a head of household, if you are married filing a separate return or if you and your spouse did not live together and your income is less than $25,000 none of your benefits will be taxed.
If you are married and filing a joint return, you will not pay any taxes on your SSDI benefits if your combined income is less than $32,000.

When Am I Required to Pay Taxes on My SSDI Benefits?

If your income exceeds these levels, you may be required to pay taxes on up to 50 percent of the benefits you received under SSDI. Keep in mind, there are often different rules that apply to those beneficiaries who are collecting SSDI payments because they are legally blind.

Higher income households may be required to pay additional taxes on SSDI income. Up to 85 percent of SSDI income is taxable if you combine one-half of the benefits you received under SSDI and other income which would be taxable as follows:

If you are single, a head of household, if you are married filing a separate return or if you and your spouse did not live together and your income is more than $34,000 you will be expected to pay taxes on 85 percent of the benefits you received.
If you are married and filing a joint return and your household income is $44,000 or more your will pay taxes on 85 percent of your SSDI benefits.
Any time you are filing a return separately from your spouse whom you loved with during the year, you may be required to pay taxes on 85 percent of your SSDI benefits.

Any year, in which you collect SSDI benefits, you will be issued a Form SSA-1099 for use in preparing your taxes.

Social Security Disability Benefits Statistics

According to the current statistics offered by the Social Security Administration, there are more than 10,000,000 people currently collecting disability payments. While many of these recipients will not be required to pay federal taxes, some states tax their income. New York is not one of the states that taxes SSDI benefits although Connecticut does impose a state tax.

Call a Social Security Disability Benefits Attorney

If you are considering applying for SSDI benefits you may wish to discuss the tax ramification of getting benefits with an attorney who understands the social security rules. This is particularly true in the event you are eligible for a lump sum “back payment” when you apply as these amounts may be subjected to taxation.

Updated July 2019