Social Security Disability (SSD) back pay is taxable as part of the current year’s income, which may increase the amount of taxes owed. However, many SSD recipients won’t owe taxes if their income is below certain thresholds. Recipients can choose to determine the taxable amount based on their current year’s income or by separately figuring the taxable amount for an earlier year.
When applying for disability benefits, one of the major challenges applicants face is the lengthy decision-making process of the Social Security Administration (SSA). It can take over a year for the SSA to reach a decision. Once approved, beneficiaries receive back pay to cover the benefits they missed during the decision period, starting from their Effective Onset Date, which is usually when they applied for benefits.
Taxability of SSD Back Pay: The back pay received by beneficiaries is considered taxable income for the year it is received, as per the IRS. This could potentially increase the amount of income taxes owed. However, not all SSD recipients will owe taxes on their back pay. For individuals, if the total income, including SSA back pay, is less than $25,000, no taxes are owed. For married couples filing jointly, this threshold is $32,000.
Beneficiaries have two options to determine the taxable amount of their back pay:
- Use their current year’s income to determine the taxable part of the total benefits received in the current year.
- Elect to figure the taxable amount of the SSD back pay for an earlier year separately, based on their income for that year.
Getting the Disability Benefits You Deserve: Marc Whitehead & Associates assist individuals across the U.S. in obtaining disability benefits from the SSA, the Veterans Administration, and private insurance companies. We support applicants at all stages of the claims process. If your claim has been denied, we can help you file a successful appeal by ensuring all necessary documentation is submitted.
For assistance with your disability claim or to schedule a free, no-obligation consultation with one of our experienced social security disability lawyers, call Marc Whitehead & Associates at 800-562-9830. We serve clients nationwide.
