Tax question regarding SSDI

[Cooper@1960]

What is the name of your state?Ohio

I started receiving SSDI this month, my yearly benefit will be $34,134. From what I have read anything under $34,000 yearly is tax free barring any other income, that puts me $134 over the tax free amount.

If I open a Roth IRA will I be able to deduct that contribution so my yearly benefits are tax free?

 

[Taxing Matters]

If I open a Roth IRA will I be able to deduct that contribution so my yearly benefits are tax free?

Roth IRA contributions are not deductible.

 

[Cooper@1960]

Roth IRA contributions are not deductible.

Ok, thank you.

 

[LdiJ]

What is the name of your state?Ohio

I started receiving SSDI this month, my yearly benefit will be $34,134. From what I have read anything under $34,000 yearly is tax free barring any other income, that puts me $134 over the tax free amount.

If I open a Roth IRA will I be able to deduct that contribution so my yearly benefits are tax free?

That is not accurate on a federal level. Where did you read that? SSDI benefits, if you have no other income, are never taxable. You have to have other income before SS benefits begin to be partially taxable.

 

[Cooper@1960]

That is not accurate on a federal level. Where did you read that? SSDI benefits, if you have no other income, are never taxable. You have to have other income before SS benefits begin to be partially taxable.

Maybe I misunderstood what I have read then. I don't know how to post a link but here's a cut and paste I pulled from a Google search.

""If you are single and you make more than $34,000 (or married and make more than $44,000), 85% of your benefits could be taxed.
If your disability benefits are subject to taxation because your income is above these limits, your disability benefits would be taxed at your marginal tax rate. In other words, you would not pay taxes of 50% or 85% of your benefits, you would probably pay taxes of about 10-15% on 50%-85% of your benefits. Higher income people might pay taxes of 33-35% on 85% of their benefits.""

So after re reading and taking into account what you said Ldij, it means I have to have earned income above $34,000 before my disability benefits are taxed. That means SSDI benefits are not considered earned income, correct?

 

[Janke]

Maybe I misunderstood what I have read then. I don't know how to post a link but here's a cut and paste I pulled from a Google search.

So after re reading and taking into account what you said Ldij, it means I have to have earned income above $34,000 before my disability benefits are taxed. That means SSDI benefits are not considered earned income, correct?

SSDI is never considered EARNED income. You are using the wrong term. Earned income is either wages or self-employment. SSDI or retirement Social Security may or may not be taxable, depending upon all your other income sources and amounts. Taxable income also can include pensions, rental income, interest and dividends.

 

[LdiJ]

Maybe I misunderstood what I have read then. I don't know how to post a link but here's a cut and paste I pulled from a Google search.

""If you are single and you make more than $34,000 (or married and make more than $44,000), 85% of your benefits could be taxed.
If your disability benefits are subject to taxation because your income is above these limits, your disability benefits would be taxed at your marginal tax rate. In other words, you would not pay taxes of 50% or 85% of your benefits, you would probably pay taxes of about 10-15% on 50%-85% of your benefits. Higher income people might pay taxes of 33-35% on 85% of their benefits.""

So after re reading and taking into account what you said Ldij, it means I have to have earned income above $34,000 before my disability benefits are taxed. That means SSDI benefits are not considered earned income, correct?

Wow, that is wrong on a couple of different levels. However, they are talking about the computation levels to determine whether or not someone's SS Benefits are taxable or not. The formula (roughly) goes like this:

If 1/2 of your Social Security income plus all of the rest of your other income, is more than 25,000 (34,000 married) then some of your SS Benefits begin to become taxable. It gradually phases in between 25,000 (34,000 married) and 34,000 (44,000 married) until it maxes out at 85% of your SS Benefits being considered to be taxable income.

If Social Security is all that you have, none of it is taxable.

 

[Cooper@1960]

Got it, thank you.