Can I get a tax refund if my only income is from Social Security disability?

Is it possible to receive a tax refund if you are on Social Security Disability Benefits?

Social Security disability benefits provide essential financial support to millions of Americans who are unable to work due to a severe, long-term disability. Most disability beneficiaries do not file income taxes because they are not working and therefore do not have to file their taxes every year. However, even if your only income for the year 2025 was from SSDI or SSI benefits, you may still be eligible to receive certain tax credits. This article will explore the potential tax implications regarding SSDI and SSI benefits. As always, if you should consult a tax professional regarding your specific situation. 

If your sole income stream consists of Social Security disability benefits, but you’re curious if there’s a way to see a refund hit your bank account this tax season, it’s essential to gain a clear understanding of the tax implications of these benefits. This article will break down the factors that could potentially lead you to a tax refund, helping you make the most of your financial situation.

Understanding the Taxability of Social Security Disability Benefits

Social Security benefits are taxable depending on your financial situation. Generally, if you are single and your disability benefits do not rise above $25,000, your disability benefits will not be taxed. If your annual SSDi benefits are between $25,000 and $34,000, up to 50% of your benefits may count as taxable income for the year. If you are single and your taxable income for the year 2025 rises above $34,000, then up to 85% of your benefits counts as taxable income. Keep in mind that these percentages do not mean that you will owe up to 85% of your SSDI income, it just means that 85% of your SSDI income is subject to taxation at your effective tax rate.

For those who are married and file jointly, the amounts are slightly different. If your combined income as a couple is between $25,000 and $34,000 for the year, then up to 50% of your SSDI benefit is subject to taxation at the applicable effective tax rate. If you file jointly and your income rises above $34,000, then up to 85% of your benefit is taxable at whatever the applicable effective tax rate.

As you can see, while most people do not have to pay taxes on their SSDI benefits because their annual SSDI income does not rise above the threshold for taxation, those who are married to a spouse who earns income, or those SSDI beneficiaries who receive income from other sources such as dividend income or interest, may pay taxes on their benefit.

Generally, SSI beneficiaries do not pay taxes on their benefits. SSI is a low-income, needs based program. Unlike SSDI, SSI beneficiaries do not need to have worked and paid FICA taxes in order to be eligible for SSI. This is because the program is to reduce poverty for those who are elderly (age 65 and older) or disabled. In order to meet the non-medical requirements of SSI, beneficiaries must have less than $2,000 in total benefits if single, less than $3,000 in total benefits if married. Because SSI beneficiaries do not receive enough annual income to meet the minimum tax brackets, SSI benefits are generally not taxed.

When Social Security Disability Benefits Become Taxable

Disability benefits become taxable when your annual income rises above $25,000 if you file as a single individual, or if your income rises above $32,000 if you are married and file jointly.

The Distinction Between SSDI and SSI for Tax Purposes

The IRS does not count SSI benefits as taxable income. SSDI income may be taxable, depending on your gross annual income as a single person or as a couple.

Can I Get a Tax Refund While On Disability?

Because most disability beneficiaries do not owe income taxes and do not need to file taxes, the IRS does not pay a tax refund. This is because the average SSDI payment is around $1,755 per month, so the average disability beneficiary is not receiving enough annual income to owe any federal taxes. Because the typical beneficiary does not file taxes every year, they therefore do not receive any tax refunds. However, if you have other income, such as from dividends or property income, your annual income may be taxed at the applicable tax rate, and you may be entitled to a refund depending on your specific situation. If you believe you may need to file taxes on your SSDI income, you should consult a tax professional.

Reason 1: Federal Taxes Were Accidentally Withheld

If too much in taxes is accidentally withheld, you may be owed a refund. In the event of overwitholding, you will not have access to that money until you receive your income check.

Reason 2: Qualifying for Refundable Tax Credits

A “tax credit” is different from a “tax refund” because it reduces the amount of taxes you may owe to the government, while a tax refund is money that the government owes to you. People on Social Security disability can receive the following tax credits:

• child and dependent care credit
• credit for the elderly and the disabled, and
• earned income tax credit

These credits may reduce the amount of taxable income that disability beneficiaries must report to the IRS, thus reducing their taxable income.

Reason 3: No Taxable Income Means No Tax Liability

If you do not have taxable income, or if your taxable income does not exceed the thresholds for individuals filing as a single person or a couple filing jointly, then you do not have any tax liability.

Reason 4: Taxes Were Voluntarily Withheld From SSDI Benefits

Instead of paying taxes directly, you can choose to have the IRS deduct taxes directly from your monthly SSDI benefits. You can choose to withhold 10%, 12%, 20%, or 22% of your monthly disability payment. To have your taxes withheld directly, fill out and return IRS Form W-4 – Voluntary Withholding Request.

The Earned Income Tax Credit (EITC) and the “Earned Income” Requirement

According to the IRS, to “qualify, you must have under $11,950 in investment income and earn less than a specific income level from working. The income level ranges from: $19,104 if you’re single with no children to $68,675 if you’re married filing jointly with 3 or more children.”

The Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC)

Per the IRS website:

“For 2025, the credit is up to $2,200 per qualifying child. To qualify, you (or your spouse, if married filing jointly,) and each qualifying child must have a Social Security number that is valid for employment in the United States and issued before the due date of the tax return (including extensions). Additionally, a child must:

• Be under age 17 at the end of 2025,
• Be claimed as a dependent on your tax return, and
• Meet other criteria.

A portion of the Child Tax Credit is refundable for 2025. This portion is called the Additional Child Tax Credit (ACTC). For 2025, up to $1,700 per qualifying child may be refundable.”

How a Refund Happens When You Have No Taxable Income

According to TurboTax, “refundable tax credits can result in a tax refund if the total of these credits is greater than the tax you owe.” The IRS recommends filing taxes even if it is not required, since you could miss out on potential tax refunds if you fail to file your taxes.

Your SSA-1099: Social Security Benefit Statement

To report your disability income, download your SSA-1099 in your My Social Security account.

Tracking Your Refund Status

To check the status of your refund, you can use this IRS tool.

State Income Taxes and Social Security Disability

In the State of California, all SSDI disability payments are exempt from state income tax.

Seeking Professional Help and Resources

Each individual case is unique. If you have questions about the impact of your SSDI benefits on your tax situation, you should consult a tax professional.

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