Do You Pay Taxes on Social Security Disability Benefits in Oregon?

When Are Social Security Disability Benefits Taxable?

Most people who receive Social Security Disability Insurance (SSDI) benefits don’t earn enough income to owe taxes on their benefits.

However, some benefits may be taxable if you have additional income from other sources, such as:

• Investment income. This can include dividends, interest or rental properties
• A spouse’s income if you file jointly
• A pension or retirement fund

If your total combined income exceeds the IRS’s income limits, part of your SSDI benefits may be subject to federal income tax.

How the IRS Determines If Your Benefits Are Taxable

The IRS uses a formula called “combined income” to determine if your Social Security Disability benefits are taxable. Your combined income includes:

• Half of your SSDI benefits
• Your adjusted gross income—wages, self-employment income, taxable interest and retirement income
• Nontaxable interest, such as municipal bond interest

Here is a guide to help you understand the federal income limits for taxation.

For single filers:

• If your combined income is under $25,000, you pay no taxes.
• If your combined income is $25,000-$34,000, 50 percent of your disability benefits may be taxable.
• If your combined income is over $34,000, 85 percent of your benefits may be taxable.

For married couples filing jointly:

• If your combined income is less than $32,000, you pay no taxes.
• If your combined income is $32,000-$44,000, 50 percent of your benefits may be taxable.
• If your combined income is over $44,000, 85 percent of your benefits may be taxable.

For married couples filing separately:

• If you file separately from your spouse, your SSDI benefits may be fully taxable, depending on your total household income.

Important Note: What These Percentages Actually Mean…

If you fall into a bracket that has to pay taxes, it does not mean you lose 50 percent or 85 percent of your disability benefits to taxes.

Instead, it means they add this percentage of your disability benefits to your total taxable income which they use to calculate your taxes.

For example, if you are single and your combined income is $30,000, half of your benefits may count as taxable income. That number (equaling half your benefits) adds to the final number that you pay taxes on. The amount of taxes depends on where that total falls in the tax brackets.

For help getting disability benefits in the first place, talk to the disability lawyers at Wells, Manning, Eitenmiller & Taylor. We’ve helped thousands of people just like you.

Does Oregon Tax Social Security Benefits? Is SSI Taxable? How Do I Pay the Taxes?

If you receive Social Security Disability Insurance in Oregon, you may wonder about state taxes. Does Oregon tax Social Security Disability?

Good news: Oregon does not tax Social Security benefits, including disability benefits. That means:

• No state income tax on SSDI—no matter your income level.
• Even if you owe federal taxes, Oregon won’t tax your benefits.

What About SSI Benefits? Are They Taxable?

SSDI is one of two disability benefits programs run by Social Security. The other one, Supplemental Security Income (SSI), is for people with limited work records, income and financial assets.

Do they tax your SSI benefits?

No. SSI is tax-free at both the state and federal levels.

What If You Owe Taxes on SSDI Benefits? How Do You Pay Them?

If you owe taxes on your disability benefits, there are ways to reduce the financial impact:

• Pay estimated taxes quarterly to avoid a lump-sum payment at the end of the year.
• Request tax withholding from the Social Security Administration so you pay a small amount out of your benefits each month.
• Spread out lump-sum back payments of disability benefits across multiple tax years to lower your taxable income in any single year.

If you need to know whether your disability benefits are taxable, a tax professional can guide you based on your personal financial situation.

If you need help with anything else related to disability benefits in Oregon—-applying for disability, appealing a denial, or understanding your right to benefits, our Oregon disability lawyers are here for you.

Wells, Manning, Eitenmiller & Taylor has been helping Oregonians since 1980 get the Social Security Disability benefits they need.

You PAY NO FEE UNTIL YOU WIN benefits.

Get in touch with us for a free consultation on your eligibility for disability benefits.

This information is for educational purposes and isn’t tax advice. For guidance tailored to your situation, consult a qualified tax professional.