Disability Income and Taxes
One of the great misconceptions that our Montgomery Social Security lawyers run into is the idea that Social Security disability benefits are automatically exempt from taxes. We would love to be able to tell our clients that they do not have to pay taxes on the disability income that they receive; however, this is simply not the case. In fact we are pretty sure that most people don't want to have to pay taxes at all.
Even though you can't believe everything that you read on the internet, we would point out that if you were to Google Social Security disability income and taxes that you would find many good articles that discuss the fact that Social Security disability benefits are taxed. In fact the disability benefits are taxed in the same way as regular income. This is also true whether the benefits are retirement benefits, survivor benefits, or disability benefits.
However, we should probably break this down into two categories. Typically disability recipients who are receiving Social Security disability insurance (SSDI) may pay taxes. It will be based upon their overall household income. Also, if you receive Supplemental Security Income (SSI) then you will seldom pay income taxes because there is insufficient income to tax. According to H&R Block, none of your SSDI is taxable if one half of your SSDI plus all other income is less than:
- $25,000 if you filed as a single head of household or married filing separately or to $32,000 if you're married filing jointly.
- If your income is more than those amounts then up to 50% of your SSDI is taxable and also up to 85% of your SSDI taxable.
If you fall into one of the following categories categories: $35,000 if you filed a single head of household or married filing separately or to $44,000 if you're married filing jointly. In Alabama Social Security income is fully exempt from taxation regardless of how much money you make either in retirement or from other sources. You won't have to pay any additional tax to the State of Alabama on your benefits.
There are certain situations that you must be aware. If in 2017 you receive a lump-sum payment of back due disability benefits, then you are allowed to spread that lump sum payment out over the period of years that it is assessed for by spreading the taxes on the lump sum benefits over a period of previous tax years. You're able to reduce the tax burden if there is one at all. Also you may be able to deduct the attorney fees that you pay in order to collect your Social Security disability benefits; to take this deduction you must file an itemized return. The deduction is limited to the same extent that your Social Security is being exact taxed. For example if you paid taxes on 50% of your Social Security benefits received, then you may only deduct half of the attorney fees paid in that year.
We know that taxes and disability can be extremely confusing, and we don’t claim to be tax experts. We believe that when you recover your back due Social Security benefits that you immediately contact a a tax expert. We believe that the best place to state is with a Certified Public Accountant.
Our Montgomery Social Security attorneys are not claim to be certified public accountants. We are not in the business of giving a tax advice, but we can always refer to appropriate tax experts. We tell all of our clients who receive a lump-sum benefit to please disclose this to your tax preparation expert so that they may address it properly. The last thing that we want to see happen is to have a client have tax troubles.
At The Sellers Law Firm, we can help you collect your disability benefits. We have collected millions and millions of dollars over the past three decades. We have offices in Montgomery, Selma, Greenville, and Troy. All consultations are always free, and we only get paid if you do! Call us at 334- LAWYERS (529-9377) and meet the team that can help you! You may also reach one of our Montgomery Social Security attorneys by using the “text us” link or Contact Form on our website. Remember that doing nothing, changes nothing so act today!