The full retirement age right now is 66, but you can receive benefits as early as 62. By receiving early retirement, you are withholding some of you monthly payment. You could be getting a third more if you wait until full retirement age. Essentially, you will be getting a 50 percent penalty on your monthly benefits if you want to receive them before the age of 66. If you do wait until full retirement age, you will be allowed to earn up to $41,880 before your income starts affecting your SS benefits.
For most people, Social Security Disability benefits cannot be taxed. This is especially true for both those who also make additional income as well as those who just depend on SSD benefits. If your spouse has another source of income, then it is likely that your SSD benefits can be taxed. You will have to pay taxes on roughly half of your benefits if you make more than $25,000, but no more than $34,000. You could tax up to 85 percent of your income if you make more than $34,000 and you are single.
If your income exceeds the Social Security limit, your disability benefits may be taxed. Generally, an individual will pay roughly 10 to 15 percent on taxes and those with a higher income will pay about 33 to 35 percent on 85 percent of their taxes. You will find that most states don’t tax disability benefits, but there are some that will tax them. If you end up receiving a lump-sum for backpay, then you might need to tax this amount during the same year you received it which can increase your tax rate.
Your working income could make your Social Security Disability benefits taxable. For those who file taxes early, Social Security uses a combination of the income you make to figure out your monthly payment.
The combined income is figured by adding these sources together:
● Adjusted gross income
● Interest that isn’t taxable
● 50 percent of SS benefits
If this a current situation you are dealing with, you should reach out to a Social Security Disability lawyer. They will be able to answer any questions as well as help with anything during the application process.