Filing taxes on disability benefits doesn't have to be complicated or expensive. Here's how to get free tax preparation help.
In this article, we'll cover:
- Do you need to file taxes?
- Free tax preparation options
- What documents to gather
- Tax credits you may qualify for
1. Do You Need to File Taxes?
SSI benefits:
- SSI is NOT taxable
- Don't report SSI as income
- May still need to file for other reasons
- Like claiming refundable credits
SSDI benefits:
- May or may not be taxable
- Depends on total income
- Up to 85% could be taxable
- SSA sends form SSA-1099
When SSDI is taxable:
| Filing Status | Combined Income | Taxable Amount | |---------------|-----------------|----------------| | Single | Under $25,000 | $0 | | Single | $25,000-$34,000 | Up to 50% | | Single | Over $34,000 | Up to 85% | | Married | Under $32,000 | $0 | | Married | $32,000-$44,000 | Up to 50% | | Married | Over $44,000 | Up to 85% |
Combined income formula:
- Adjusted Gross Income (AGI)
- Plus nontaxable interest
- Plus half your Social Security benefits
- = Combined Income
When to file anyway:
- To claim refundable tax credits
- Had taxes withheld from other income
- Self-employment income
- State requirements
2. Free Tax Preparation Options
VITA (Volunteer Income Tax Assistance):
- Free tax prep for income under ~$67,000
- Trained IRS-certified volunteers
- Focus on disabilities, elderly, limited English
- Find sites at irs.gov/vita
AARP Tax-Aide:
- Free for anyone, focus on 50+
- Also helps people with disabilities
- Find locations at aarp.org/taxaide
- No AARP membership required
TCE (Tax Counseling for the Elderly):
- Specializes in pension and retirement issues
- Helps with disability benefits questions
- Often same locations as VITA
- Free service
IRS Free File:
- Online filing for income under ~$84,000
- Free software options
- Do it yourself
- irs.gov/freefile
MyFreeTaxes:
- Supported by United Way
- Free for income under ~$84,000
- Online filing
- Phone support available
Important: Never pay for basic tax prep when you qualify for free services. Many people on disability benefits qualify.
3. What Documents to Gather
For Social Security benefits:
- Form SSA-1099 (Social Security Benefit Statement)
- Arrives January each year
- Shows total benefits received
- Get copy from my Social Security if lost
If you worked:
- W-2 forms from employers
- 1099 forms for contract work
- Records of work expenses
Other income:
- 1099-INT (interest)
- 1099-DIV (dividends)
- 1099-G (unemployment, state refunds)
- Any other income documents
For deductions and credits:
- Medical expense receipts
- Charitable donations
- Child care expenses
- Education expenses
Identity verification:
- Social Security numbers for all family
- Valid ID
- Prior year tax return (if available)
- Bank account info for direct deposit refund
4. Tax Credits You May Qualify For
Earned Income Tax Credit (EITC):
- For people who work (even a little)
- Refundable credit
- Can be substantial
- Must have earned income
Child Tax Credit:
- If you have dependent children
- Partially refundable
- Check current year limits
- Can mean big refund
Credit for Other Dependents:
- Adult dependents may qualify
- Smaller than Child Tax Credit
- But still helpful
- Check eligibility
Saver's Credit:
- If you contributed to retirement account
- While working on disability
- 10-50% of contributions
- Based on income
Medical expense deduction:
- If expenses exceed 7.5% of income
- Many disability-related costs qualify
- Keep good records
- May be significant
State Taxes
State rules vary:
- Some states don't tax Social Security
- Others have different rules
- Check your state's requirements
- May need to file even if federal exempt
Free state filing:
- Many VITA/Tax-Aide sites do state taxes
- Free File may include state
- Check what's covered
- Don't assume federal-only
How Purple Helps
- Clear record of all deposits
- Transaction history for income tracking
- Easy export for tax purposes
- Organized financial records
- SSA-1099 shows on statements