Is Social Security Disability Taxable in Arkansas?

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The direct answer to this question is yes. However, most individuals who receive disability benefits do not pay any or are only required to pay a small portion of taxes. Arkansas is one of many states that only taxes a portion of disability based on the household income. 

Do I Have to Pay Taxes on My Social Security Benefits?

Since the taxable amount is based on household income, this will vary from household to household. The best way to understand how much you will be required to pay is to look at the graphs below. 

Maximum Taxable Portion0%50%85%
Individual Household Income$0 - $25,000$25,000 - $34,000Over $34,000
Married Household Income$0 - $32,000$32,000 - $44,000Over $44,000

Example 1: An individual qualifies for Social Security disability and makes $28,000 annually through SSDI and other sources. Up to 50% of that individuals SSDI benefits would be taxable. 

Example 2: One member of a married couple qualifies for SSDI. Their annual household income is less than $32,000 annually. Therefore, 0% of those qualify to be taxed.

It is important to note that the 50% and 85% columns represent the maximum taxable portion of their benefits. Calculating the actual taxable portion is best left to the IRS form 1040. You can calculate your taxable portion on the IRS Website’s Social Security Disability Benefits Tax Calculator

Is My Lump-sum Social Security Disability Back Pay Taxable?

A lump-sum SSI or SSDI payment is taxable in the same way described above. It is recommended that you spread that back-payment onto tax returns from the previous year in which back-payment was owed. This can help to spread out your taxable income over a few years so that you will avoid reaching a higher bracket in the current year. 

Example: The married couple above qualified for 18 months of back pay for social security. It would be advisable to split those payments up over the current year and as many previous years as possible. This will help to lower the total amount of income from each year.

In conclusion, while Social Security Disability is taxable, most individuals who qualify for benefits do not pay taxes on them. In many cases, if an individual or married couple would have to pay taxes on a large portion of their benefits they would not qualify in the first place. It is important to discuss with an expert in Social Security Benefits to determine if you qualify for benefits. They will be able to guide you through the process and give you the best chance of receiving payments.

If you are applying for Social Security, let Wren Law Firm review your case for FREE. We have over 20 years of experience in Social Security and Disability law and can help get you the benefits you deserve.

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