SSDI Warning: These 9 States Could Be Taxing Your Disability Benefits

So, you’re receiving Social Security Disability Insurance (SSDI) and finally seeing that deposit hit your account this week. Awesome — it’s a relief knowing there’s some financial support coming in when work isn’t an option. But here’s something a lot of folks don’t realize until tax season rolls around:

In some states, you might actually owe taxes on that SSDI money.

Yep, even though it’s a government benefit, not everyone gets to keep the full amount without the tax man taking a cut. Let’s break this down in plain English.

First Up: Federal Taxes — Will the IRS Come Knocking?

If SSDI is the only income you have, you’re probably in the clear when it comes to federal taxes. The IRS usually doesn’t tax your benefits unless you have other money coming in — like a spouse’s paycheck, some savings interest, or part-time income.

Here’s how the math works:

• If you’re single and your total income (including half of your SSDI) is over $25,000, you might owe taxes on part of your benefits.

• If you’re married, that line moves up to $32,000.

So if you’re living simply on SSDI alone, relax — the IRS probably won’t be sending you a bill. But once other income enters the picture, things can change.

Now for the Tricky Part: State Taxes

Here’s where it gets a little more frustrating. While most states don’t tax SSDI at all, there are still a handful that do. And if you live in one of them, you might see a chunk of your benefits counted as taxable income — depending on how much you make overall.

As of 2025, the states that still tax SSDI or other Social Security benefits are:

• Colorado

• Connecticut

• Minnesota

• Montana

• New Mexico

• Rhode Island

• Utah

• Vermont

• West Virginia (but they’re slowly phasing this out)

Each of these states has its own quirks. Some have income thresholds. Others offer partial deductions if you’re older or lower-income. It’s honestly kind of a patchwork.

For example:

• West Virginia is gradually dropping its tax on Social Security. In 2025, only 35% of your benefits are taxed. By 2026, you’re in the clear completely.

• New Mexico does offer breaks for seniors or people with lower income — but not everyone qualifies.

So yeah, it depends. (Don’t you love that answer?)

What Should You Actually Do About This?

If you’re thinking, “Okay, great, now what?” — here’s what to keep in mind:

1. Look up your state’s rules. It’s not hard — just check your state tax department website or Google “SSDI tax [your state]” to get the details.

2. Figure out how much income you really have. SSDI is one part, but if you have any other income (even a small amount), it could push you into the taxable zone.

3. Talk to a tax pro. Seriously. A quick call to someone who knows the ropes could save you from a surprise bill or worse — a penalty.

4. Prepare ahead. If it looks like you’ll owe, consider setting aside a little from each payment or adjusting any withholdings.

No One Likes Surprise Tax Bills

Getting SSDI shouldn’t be stressful — but taxes can make things messy if you don’t know the rules. Luckily, most people don’t owe anything. But if you live in one of those nine states or have some extra income on the side, it’s worth looking into so you’re not blindsided come tax time.