Understanding tax implications of SSDI and SSI benefits

Unfortunately, there is no simple “yes” or “no” answer to the question, "Do I have to pay federal taxes on my SSDI benefits?" Some people are not required to pay any federal taxes on their SSDI benefits while others must pay taxes on a certain percentage of their benefits.

Generally, if you receive a significant amount of income aside from your SSDI benefits, (such as wages, self-employment earnings, dividends, etc.) there is a strong likelihood that you will have to pay taxes on either 50% or 85% of your benefits.  

Please be aware that benefits specialists who provide beneficiaries with information and guidance on how working may affect their SSDI benefits are permitted only to provide you with this general information. They are not trained or qualified to calculate whether you will be taxed on your SSDI, the percentage of your SSDI that may be taxed or how much tax you may owe.  

If you have a fairly high SSDI payment and a significant amount of other income, it is strongly recommended that you consult with a qualified accountant. He or she may be able to suggest options that can help reduce or eliminate this “extra” tax burden.  

Do I have to pay Rhode Island state taxes on my SSDI benefits?

Rhode Island is one of the few states that taxes SSDI benefits. If you are younger than full retirement age, you may be required to pay state taxes on up to 85% of your benefits.

The good news is that once you reach your full retirement age, your SSDI benefits will automatically become retirement benefits. At this point you are only required to pay state taxes on your benefits if:

  • You file as single, married filing separately or head of household and have an adjusted gross income (AGI) of $95,800 or more.
  • You file jointly and have an adjusted gross income of $119,750 or more.

Are my Supplemental Security Income (SSI) benefits taxable?

There is a simple answer to this question: SSI payments are not taxable. If you receive SSI benefits and have no other income, you are not even required to file a tax return.  

Note, however, that if you work and receive SSI payments, you may wish to consider filing a return to claim the “Earned Income Tax Credit.” You should remember, though, that your SSI benefits are not counted as earned income for this purpose.