How to File an Income Tax Return for Social Security Disability

Some of your Social Security disability income may be taxable.

Between 50 and 85 percent of your Social Security disability benefits may be subject to federal income tax depending on your total income. In a few steps, you can determine how much, if any, of your benefits are taxable income and how to report this income on your federal income tax return.

Things You'll Need

• Form 1040
• SSA-1099
• Form 1040 instructions

Instructions

1. Complete Lines 1 to 21 and 23 to 32 of Form 1040 as normal.

2. Go to the Social Security Benefits Worksheet in the instructions for Form 1040 (find a link to the instructions in the References section). The worksheet can generally be found around page 25 to 30 -- its exact location changes from year to year. This worksheet will go through determining how much of your Social Security disability benefit is taxable.

3. Add the amounts in Line 5 of all SSA-1099 forms you received and put this in Line 1 of the worksheet. Divide this by 2 and put the result in Line 2.

4. Add all of your taxable income from Form 1040 as found in Lines 7, 8a, 9a, 10 to 14, 15b, 16b, 17 to19 and 21. Put the result in Line 3. Line 4 is your tax-exempt interest as found in Line 8b of Form 1040.

5. Add Lines 1 through 4 of the worksheet and put the result in Line 5.

6. Add all your deduction and exemptions. Put the result in Line 6 of the worksheet. If Line 6 is greater than or equal to Line 5, none of your benefits are taxable because you have more deductions than taxable income. Write 0 in Line 20b of Form 1040. If Line 6 is less than Line 5 then subtract Line 6 from Line 5 and put the result in Line 7.

7. For 2010, enter $32,000 in Line 8 if you are married filing jointly. Enter $25,000 if you are single or married filing separately and have lived apart from your spouse for the entire tax year. Enter $0 if you are married filing separately and did live your spouse during any part of the year. (These are called your Base Amounts, and could change for later years. Follow the link to Publication 915 in the Reference section to check for your current tax year.) If you are married filing separately and haven't lived apart, multiply Line 7 by 0.85, enter the result in Line 16 and continue the worksheet at Line 17.

8. Stop if the amount in Line 8 is equal to or greater than the amount in Line 7; none of your benefits are taxable. Otherwise subtract Line 8 from Line 7 and put the result in Line 9.

9. Follow the directions for Lines 10 through 18. These are simple manipulations and comparisons that will lead to your taxable income. Copy the final result on Line 19 to Form1040 Line 20b. Complete the Rest of Form 1040 as normal and attach your SSA-1099 to it.

Tips & Warnings

• If you received a lump sum benefit payment that included previous years, you may be able to reduce the taxes you owe by completing worksheets 2, 3 and 4 of publication 915. Find a link in the References section.

References

• IRS: Publication 915
• IRS: Form 1040 Instructions