If you’ve ever wondered whether disability benefits are taxed – or how – here is a great article that explains all the ramifications of these payments. Follow the link at the end to see the full article. It comes from the extensive web site maintained by the National Organization of Social Security representatives:
Income Tax on Social Security Benefits.
The Basic Rule. Up to 50% of Social Security benefits are taxable if total “provisional income” (adjusted gross income, tax-exempt interest and one half of Social Security benefits) exceeds a base amount: $25,000 for single taxpayers and $32,000 for married taxpayers filing jointly. At this level, taxes are payable on the lesser of (1) 50% of Social Security benefits received, or (2) one half of the difference between provisional income and the applicable base amount. Fortunately, this is the end of the income taxation picture for most recipients of disability benefits. Article here: