Is Social Security Disability Taxable in Pennsylvania?

Social Security Disability Insurance (SSDI) benefits are available to people with qualifying disabilities, illnesses, and injuries in Pennsylvania. If you receive SSDI benefits in Pennsylvania, they may be taxable, depending on how much you earn in additional income from other sources.

While SSDI benefits in Pennsylvania are not taxable in many cases, they are in others. The Social Security Administration (SSA) determines tax liability by adding one-half of a recipient’s annual benefits with their additional income. If that sum exceeds a recipient’s base amount for their filing status, they may have to pay taxes on their disability benefits. Even if they don’t have a tax liability for disability benefits specifically, recipients may have a separate tax liability if they earn enough in additional income. This can be challenging to figure out, which is why recipients should seek assistance.

For a free case evaluation with the Pennsylvania disability lawyers at Young, Marr, Mallis & Associates, contact us today at (215) 515-2954.

Is Income from Social Security Disability Taxable in Pennsylvania?

As a recipient of Social Security Disability Insurance benefits, you might expect your tax liability to drop to nothing. While SSDI recipients often are not required to pay taxes on their benefits, there are some circumstances where they might.

Depending on your income outside of SSDI benefits, you may have a tax liability for your benefits in addition to a tax liability for other income. Notably, this doesn’t apply to recipients of Supplemental Social Security Income, only those receiving disability, retirement, or survivor’s benefits in Pennsylvania.

Tax liability for SSDI recipients is determined by a simple equation provided by the Social Security Administration. If one-half of your SSDI benefits for the year, plus all other income you earn, is larger than your base amount according to your filing status, you may be required to pay taxes on your benefits. For the purposes of determining tax liability for SSDI benefits, tax-exempt interest is included in additional income.

That said, if our lawyers determine that your SSDI benefits, combined with all other income streams, are lower than your base amount, your SSDI benefits will not be taxable. Even though you may not have a tax liability as an SSDI benefit recipient in Pennsylvania, you must report your income from benefits to the IRS annually.

Figuring Your Tax Liability as a Social Security Disability Recipient in Pennsylvania

People receiving SSDI benefits in Pennsylvania may not be able to survive on those benefits alone. Because of this, many recipients work part-time jobs or even invest in real estate to increase their income while getting benefits. Depending on the amount of additional income you earn in a year, your SSDI benefits may be taxable. Our Pennsylvania disability lawyers can use the SSA’s guidelines to figure out your tax liability for SSDI benefits.

Determining your base amount might be difficult if you are unsure of your current filing status. Filing statuses can change as people age and as their family dynamics change. Currently, the base amount for people with single, head of household, or surviving spouse filing statuses is $25,000. The same base amount applies to married people filing separately that have lived apart from their spouse for a tax year. For those married and filing jointly, the base amount is $32,000. There is no base amount for married people filing separately that live with their spouse or have during the tax year.

Typically, SSDI recipients’ monthly benefits add up to be well below the base amount for their filing statuses. Our Philadelphia disability attorneys can determine your possible tax liability for your SSDI benefits based on your additional income and filing status.

The maximum SSDI monthly benefit in 2023 is $3,627. This amount is generally only available to those who have worked for many decades or are near retirement age. Getting the maximum SSDI benefit might result in a tax liability, especially if you have a lower base amount according to your filing status.

Is Income Outside of Social Security Disability Insurance Taxable in Pennsylvania?

After determining your tax liability as an SSDI recipient, it might seem that, because you do not earn enough additional income in tandem with benefits to put you over your base amount, you do not have any tax liability. That might not be the case, especially if you have a part-time job.

In Pennsylvania, SSDI recipients can earn additional income, up to a certain amount outside of their monthly benefits. In 2023, the monthly substantial gainful activity (SGA) limit for blind SSDI recipients is $2,460. For non-blind recipients, the monthly SGA limit is $1,470. While earning additional income might not result in you having a tax liability for your SSDI benefits, you might still have to pay taxes on that additional income.

Our Allentown, PA disability attorneys understand this can be difficult to comprehend for SSDI recipients. It is possible to have no tax liability for SSDI benefits and yet still have a tax liability for the additional income you earn up to the SGA limit in Pennsylvania. So, do not assume that you won’t have any tax liability whatsoever, even if you do not have to pay taxes on SSDI benefits specifically.

What if You Don’t Pay Taxes on Social Security Disability in Pennsylvania?

Failing to report or pay taxes on Social Security Disability Insurance benefits will likely result in serious consequences. Our lawyers can help you avoid this by assessing your monthly benefits and additional income to determine your liability.

The Social Security Administration often imposes financial penalties on SSDI benefit recipients who do not follow through on their tax liability. You might face serious financial consequences for failing to pay taxes on SSDI benefits in Pennsylvania.

This can be very detrimental to SSDI recipients, who rely on little income from monthly payments as well as additional income from outside sources. This is why determining your tax liability as a recipient of Social Security Disability Insurance benefits is of the utmost importance.

Contact Our Attorneys About Your Case Today

For a free case evaluation with our Berks County disability lawyers, call the team at Young, Marr, Mallis & Associates today at (215) 515-2954.