Receiving SSDI This Week? If you’re receiving SSDI (Social Security Disability Insurance) this week, there’s something you definitely need to know: you might owe state taxes on your benefits. Yep, that monthly lifeline you count on could come with a little surprise from Uncle Sam’s cousins at the state level. Now, don’t panic — not everyone has to pay, and not every state taxes SSDI. But if you live in one of the nine states that do, or if your income hits certain levels, this guide will walk you through what’s up, what to watch out for, and how to stay ahead of the game.
Receiving SSDI This Week?
Being on SSDI doesn’t mean you’re off the tax radar. If your income edges into higher territory — or if you live in one of the 9 SSDI-taxing states — you could owe money come tax time. But now that you’re armed with the facts, you can plan smartly. Check your combined income, review state rules, consider tax withholding, and consult a tax professional — especially if your income is close to the thresholds. That way, you’ll stay on top of your game and avoid those surprise bills.
| Topic | Details |
|---|---|
| What is SSDI? | Social Security Disability Insurance — a federal benefit for people with disabilities who have worked and paid into Social Security |
| Who might owe taxes? | Residents of 9 states with taxable SSDI, and individuals who exceed income thresholds federally |
| States Taxing SSDI (2025) | Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont, West Virginia |
| Federal Taxable Income Thresholds | $25,000 (single), $32,000 (married) — above which 50-85% of benefits may be taxable |
| Planning Tools | Use SSA.gov, Form W-4V, and your state’s Dept. of Revenue |
| Recommendation | Review tax law updates yearly, especially as thresholds or exemptions change |
What is SSDI and Why Might It Be Taxed?
SSDI is a federal program that provides monthly cash benefits to people who have a medically determinable disability and have worked long enough to qualify under Social Security’s rules.
While SSDI is federal, state governments have the authority to tax it just like they do income — and some choose to.
How the IRS Handles SSDI Taxes?
Federally, your SSDI is not automatically taxed — it depends on your total “combined income.”
Federal Tax Thresholds:
- Single Filers:
- $25,000–$34,000 = up to 50% of SSDI may be taxed
- Over $34,000 = up to 85% of SSDI may be taxed
- Married Filing Jointly:
- $32,000–$44,000 = up to 50%
- Over $44,000 = up to 85%
States That Tax SSDI in 2025 (And How They Do It)
Most states don’t touch your SSDI. But if you live in one of these 9 states, you might need to break out the calculator.
Here’s the breakdown:
| State | Taxation Rule |
|---|---|
| Colorado | SSDI taxed for those under 65; deductions vary by income and age |
| Connecticut | SSDI exempt for AGI < $75,000 (single) or $100,000 (married); partial tax above |
| Minnesota | Full exemption under $82,190 (single) or $105,380 (joint) |
| Montana | Follows federal rules; SSDI taxed for income above $25k/$32k |
| New Mexico | SSDI exempt under $100k (single) or $150k (joint) |
| Rhode Island | Exempt if AGI < $104,200 (single) or $130,250 (joint) |
| Utah | Flat 4.55% tax on SSDI; low-income credits may apply |
| Vermont | Full exemption up to $50k (single), $65k (joint); partial up to $60k/$75k |
| West Virginia | 65% exemption in 2025; phasing out SSDI tax completely by 2026 |
Who’s Most at Risk?
You’re most likely to owe taxes on SSDI if you:
- Live in one of the 9 states above
- Have additional income (like investments, pensions, part-time work)
- Are married and file jointly — combined income can push you over thresholds
- Don’t withhold federal income tax from your SSDI payments
What Can You Do to Avoid a Tax Surprise?
1. Know Your Income
Do the math:
Adjusted Gross Income + Nontaxable Interest + ½ SSDI = Combined Income
If you’re getting close to $25,000 (single) or $32,000 (married), it’s time to plan.
2. Set Up Withholding
Use Form W-4V to withhold 7%, 10%, 12%, or 22% of your SSDI for federal taxes. This can save you a big headache next April.
3. Use State Credits or Exemptions
Many of the 9 SSDI-taxing states offer partial exemptions, age-based credits, or phase-out deductions.
4. File Thoughtfully
Sometimes, married filing separately results in lower taxes, especially if one spouse earns a lot.
Real Example: How It Breaks Down
Let’s say Jamie, a 62-year-old in Minnesota, gets:
- $18,000 in SSDI
- $10,000 in pension income
- $4,000 in investment dividends
Combined income = $10,000 + $4,000 + $9,000 (½ SSDI) = $23,000
Jamie’s under the $82,190 limit → no Minnesota state tax on SSDI
But if their dividend income doubled to $12,000 → combined income = $31,000 → now partially taxable federally
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FAQs
Q: Is SSDI the same as SSI (Supplemental Security Income)?
A: No. SSDI is based on work credits and past earnings; SSI is need-based and for low-income individuals. Different tax rules apply.
Q: Can I deduct medical expenses?
A: Yep! If your itemized medical expenses exceed 7.5% of your AGI, you can deduct them. Keep those receipts!
Q: Can I lose SSDI if I work?
A: Not necessarily. SSDI includes a Trial Work Period (TWP) and Substantial Gainful Activity (SGA) limits.
