Are Disability Benefits Taxable?

It’s time to visit this question, which always comes up this time of year.  If the question concerns SSI benefits, the answer is clear.  SSI benefits are not taxable.

For SSD benefits, the answer is neither a clear yes or no.  According to IRS Senior Tax Consultant Kathy Howell, who blogs on these topics,

In some circumstances social security benefits can be taxable and this includes social security disability payments. .. Simply stated to determine if any of your benefits were taxable for that year you take one-half of your benefits plus all your other income.  You compare that amount with the base amount for your filing status.  For example if you are single the base amount is $25,000. If one-half of your benefits and all your other income is less than $25,000 none of your benefits are taxable.  If it is more than the base amount some of your benefits may be taxable.  If it is taxable generally, up to 50% of your benefits are taxable, however up to 85% of your benefits can be taxable under certain circumstances.  All of your benefits would not be taxable.

For more information: ; IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.