In most cases, the financial benefits you receive via Social Security Disability Insurance (SSDI) are not taxable in South Carolina. Yet, depending on your situation, you could still have to pay federal taxes based on a number of factors.
Applying for and being awarded disability benefits can prove overwhelming––and the complexities do not stop once you start receiving monthly benefits. You could benefit from partnering with an SSDI lawyer from Farmer & Morris Law, PLLC. Not only could we help you apply for benefits, but we could also explain other factors relevant to your eligibility.
The Basics About SSDI Benefits in South Carolina
According to Social Security Administration (SSA) guidelines, SSDI benefits are monthly financial compensation provided to qualified individuals who can no longer work to support themselves. SSDI could be a good fit if you worked a job that paid Social Security taxes, and you have enough work credits.
The SSA considers you disabled if:
- Your medical condition prevents you from engaging in substantial gainful activity (SGA).
- Your medical condition prevents you from doing the work you did previously or adjusting to a new position.
- Your condition will last at least a year or result in your passing.
How Do I Apply for SSDI Benefits?
Applying for benefits is complex. It means gathering an incredible range of paperwork, medical evidence, and other documents. You can apply online, in person, or by mail. The SSA notes that it generally takes three to five months to get a decision.
A lawyer can advise you of your options and guide you through the process of seeking benefits.
SSDI Is Generally Not Taxable in South Carolina
Your SSDI benefits will not be taxed by the state but might still be taxed by the federal government. The Internal Revenue Service (IRS) may tax you based on your total individual income and your total combined income if you are married. This final number is called your Adjusted Gross Income (AGI), which generally includes all income, plus half of your SSDI income. Accordingly:
- If your SSDI income is low enough, it will not be taxed at the federal level.
- Depending on your AGI, as much as half of your SSDI income could be taxable.
- If you reach the maximum allowable AGI, as much as 85% of your SSDI could be taxable.
If you are represented by an attorney, they will explain how your benefits are categorized and how your taxable status is affected.
What Income Is Considered When Calculating My AGI?
To avoid overpaying taxes or adding your SSDI income to your AGI unnecessarily, you need to know just what income is used to calculate it. According to IRS guidelines, your AGI is:
- Gross income
- Capital gains
- Business income
- Retirement distributions
If you are married and filing taxes with your spouse, their income in all these areas will be included in this calculation. That final number is your AGI and will determine whether you will owe federal taxes.
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How Much Will My SSDI Payments Be?
On your own, it can be hard to understand how much you can expect to receive in SSDI payments each month. This number varies from recipient to recipient. According to SSA guidelines, in general, your monthly payment is based on your average income. It can also be affected by:
- Other government benefits you receive
- Pension based on work that is not included in SSDI
- Any workers’ compensation financial benefits you receive
This list is not exhaustive. A good way to understand the benefits you receive and how they are calculated is to work with a Social Security Disability lawyer. They will have familiarity with SSA regulations and guidelines, proving and documenting your income, and assessing your tax situation.
Can a Lawyer Help Me Get an SSDI Lump Sum Settlement? Will It Be Taxed?
SSDI lump sum settlements are a possibility when your application is first denied, then approved. When this happens, you are entitled to backpay for the time when you should have received benefits. Your lawyer can help you recover the benefits you were entitled to receive and define the applicable date.
At the federal level, a portion of your lump sum payment might be taxable. Your lawyer will explain how IRS guidelines determine the taxable portion of any lump sum settlement you receive. They will also help you understand the correct portion to count as income and avoid paying too little or too much to the IRS.
Do I Need a Social Security Disability Lawyer?
While you are not required to have a lawyer when applying for benefits, having one would be helpful to your case in a multitude of ways. In addition to helping you meet your tax obligation, if any, the lawyer who handles your case can:
- Explain the SSDI application process
- Obtain and explain the required forms
- Provide up-to-date application information
- Compile medical records and evidence
- Document your employment history
- Review your application for accuracy
Your lawyer will also represent you during interviews and at hearings. If your initial application is denied—many first-time applications are—your lawyer will review your letter of denial and build a strong appeal on your behalf.
Get Help Understanding Your SSDI Benefits
SSDI income is not taxable in South Carolina. However, based on your situation, you might have to pay taxes at the federal level. Our law firm can offer the clarity you need while fighting for the benefits you deserve.
Get started by contacting Farmer & Morris Law, PLLC for your free case review today.