If you’ve recently started receiving Social Security Disability Insurance (SSDI) benefits, you may be wondering whether your state taxes those benefits. While federal taxes on SSDI are based on income thresholds, state taxes vary significantly. Understanding which states tax SSDI and how to reduce your tax burden can help you better manage your income in 2025.
Which States Do Not Tax SSDI Benefits?
The majority of states, including the District of Columbia, do not tax SSDI benefits. This is beneficial for recipients, allowing them to keep more of their income.
States That Do Not Tax SSDI Benefits:
| State | Tax Status |
|---|---|
| California | Exempt |
| Florida | Exempt |
| Texas | Exempt |
| New York | Exempt |
| Illinois | Exempt |
| Georgia | Exempt |
| Washington | Exempt |
| Nevada | Exempt |
| Tennessee | Exempt |
| South Carolina | Exempt |
States That Tax SSDI Benefits
However, some states impose taxes on SSDI benefits, with income thresholds that determine the taxable portion. Here are the states that currently tax SSDI benefits:
| State | Tax Criteria |
|---|---|
| Colorado | Income-dependent |
| Minnesota | Income-dependent |
| Montana | Income-dependent |
| Rhode Island | Income-dependent |
| New Mexico | Income-dependent |
| Vermont | Income-dependent |
| Utah | Income-dependent |
| West Virginia | Phasing out by 2026 |
| Connecticut | Income-dependent |
How Federal Taxes Apply to SSDI Benefits
At the federal level, SSDI benefits are taxable based on your combined income. Here’s how it works:
- Single Filers:
- Income $25,000 – $34,000: Up to 50% of SSDI benefits may be taxable.
- Income above $34,000: Up to 85% of SSDI benefits may be taxable.
- Married Couples:
- Income $32,000 – $44,000: Up to 50% of SSDI benefits may be taxable.
- Income above $44,000: Up to 85% of SSDI benefits may be taxable.
Strategies to Reduce SSDI Tax Liability
If you live in a state that taxes SSDI benefits or if your federal income exceeds the threshold, consider these strategies:
- Utilize State-Specific Tax Deductions:
- Some states offer deductions for low-income individuals, seniors, or disabled persons. Check your state’s tax department for applicable credits.
- Lower Your Taxable Income:
- Contribute to a retirement account or medical expense deductions to reduce your overall taxable income.
- Consult a Tax Professional:
- A tax advisor can help identify state-specific exemptions and credits, maximizing your deductions.
FAQs About SSDI and State Taxes
1. Do all states tax SSDI benefits?
No, only nine states currently tax SSDI benefits, each with varying income thresholds.
2. Are SSDI benefits taxed federally?
Yes, SSDI benefits can be federally taxed based on your total income and filing status.
3. How can I reduce my SSDI tax liability?
You can lower your taxable income through deductions, credits, and retirement contributions.
