Social Security Disability Insurance (SSDI) beneficiaries in Indiana must have limited earned income to qualify for this benefits program. Roughly two-thirds of the individuals receiving benefits will not have to pay federal taxes on their benefits because their additional earned income falls below the taxable baseline. Let’s explore this idea a bit further.
Income calculations for tax purposes
Calculating your taxable income is straightforward but involves a few steps. If you have unearned income from gifts, investments, inheritances or the like, you might want to contact an accountant for additional guidance. The steps to calculate your taxable income are as follows:
- Divide the amount of your total annual Social Security Disability benefits in half.
- Add this result to your annual income earned from other sources.
- Compare that calculated taxable income to the appropriate base amount presented in the following section.
- You probably won’t have to pay taxes if your calculated taxable income is below the federal base amount.
- If your calculated taxable income is more than the federal base amount, you probably will have to pay taxes on a percentage of your SSDI benefits.
Determining the maximum taxable portion of annual SSDI benefits
The amount of taxes due depends on your marital status. Married couples filing a joint return must include their spouse’s income when determining their calculated taxable income. The percentages depicted below are not tax rates; they are the percent of your SSDI benefits subject to taxation.
Single individuals or married couples filing separately
The three calculated taxable income ranges and the maximum taxable portion of the annual benefits are as follows:
- Income: $0 – $25,000 Maximum taxable portion of SSDI: 0%
- Income: $25,000 – $34,000 Maximum taxable portion of SSDI: 50%
- Income: Over $34,000 Maximum taxable portion of SSDI: 85%
Married couples filing jointly
The three calculated taxable income ranges and the maximum taxable portion of the annual benefits are as follows:
- Income: $0 – $32,000 Maximum taxable portion of SSDI: 0%
- Income: $32,000 – $44,000 Maximum taxable portion of SSDI: 50%
- Income: Over $44,000 Maximum taxable portion of SSDI: 85%
You may want to file a tax return even if you don’t have to. Contact an accountant to see if you qualify for a child or earned income tax credit.