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Taxes on Benefits
Once you've been approved for disability benefits, it is important to consider how to use the money. One important aspect of any form of income is taxes. If you're just starting to receive payments from the Social Security Administration or a disability insurance policy, learn how they are taxed before your entire check is spent.
Different programs are taxed in different ways. Use this page as a resource to learn about income taxes and disability benefits. The Coye Law Firm's disability lawyer team is well-versed in tax law as well. Call us for any questions you may have about income taxes on your benefit checks.
Taxes on Social Security Disability Benefits
Social Security benefits, whether disability, retirement, or survivor, are taxable income. If you file as an individual and your total income is more than $25,000, you need to pay taxes on your benefits. Couples who file a joint return need to pay taxes on their benefits if they make over $32,000 combined yearly.
Taxes on Supplemental Security Income
Supplemental Security Income is not taxable. Beneficiaries of SSI don't need to set aside money for taxes at the end of the year, but establishing a budget may help your payments last and build over time. Visit our page on planning how to use your disability benefits for more information.
Taxes on Disability Insurance Policies
Depending on whether you purchased a private disability insurance plan or took part in an employer-sponsored one, your disability benefits may be taxable. If your employer pays the premiums on the disability insurance policy that you receive benefits from, then they are taxable. If you split payment of the premium with an employer, then only the portion that the employer pays for is taxable. Benefits that come from private insurance policies (meaning you pay for the entire premium) are not considered as income and therefore are not taxable. There are areas on the income tax returns that allow individuals to calculate their taxable benefits. Consult the IRS website for more information.
Planning for Tax Time
Some people prefer to have their taxes taken out of their income before it is deposited into their bank accounts. This helps people live on less money and set aside the amount they will need for future taxes. The Social Security Administration offers this budgeting option to applicants and recipients. Fill out form W-4V, the "Voluntary Withholding Request," provided by the SSA and return it to a local office or by mail.
The Coye Law Firm is dedicated to working for those dealing with injuries or disabling conditions. If you need representation when it comes to tax time, don't hesitate to ask your experienced disability lawyer at our firm. We provide options and advocacy
