Do we need to pay taxes on SSDI benefits when married filing jointly?

Thank you for that explanation! Just to clarify, does this mean we should be setting aside money throughout the year to pay this tax bill? Or should my husband increase his withholding at work? I'm not sure how to handle this since I don't have taxes taken out of my SSDI payments.

Increasing your husband's withholding at work is definitely a good option. He can submit a new W-4 to his employer and either specify an additional amount to withhold from each paycheck or reduce the number of allowances he claims. Another option is to make quarterly estimated tax payments directly to the IRS if you prefer to handle it that way. You can use Form 1040-ES for this purpose. Many people in your situation find it easier to just adjust the W-4 withholding since it spreads the additional tax amount throughout the year in smaller increments.

Does it actually guide you through the process or just give information? I need something that will help me actually file correctly because I'm so confused about all these SSDI tax rules.

I've heard about this but I'm skeptical. Can it really figure out something this specific? The IRS worksheets for this calculation are super confusing.

It does actually guide you through the process by analyzing your specific situation. After uploading my documents, it walked me through exactly which portions of my benefits would be taxable based on our total income and showed me line by line how the calculation works. For the skeptics, I get it - I was hesitant too. But what impressed me was how it handled the specific SSDI worksheets the IRS requires. It automatically filled in the correct amounts and showed me what would happen at different income levels. It really removed the guesswork and showed us that while some of my SSDI would be taxable, the actual tax impact was much less than we initially feared.

How does this service actually work? Do they just call the IRS for you or something? I don't understand how a third party can get you through the IRS phone lines faster.

Sounds like a scam. There's NO WAY anyone can get through the IRS phone system faster - they're all using the same phone lines and the same hold queue. This has to be snake oil.

They use a system that navigates the IRS phone tree and waits on hold for you. When they finally get through to a real person, you get a call back to connect with the agent. So instead of waiting on hold yourself for hours, you just get a call when someone is actually ready to talk to you. The skepticism is totally fair - I felt the same way at first. But think about it this way: they're not cutting any lines or using special access. They're just handling the wait time for you so you don't have to keep your phone tied up for hours. The IRS doesn't care who's waiting on hold - whether it's you or a service doing it on your behalf. They just answer calls in the order received.

Thanks for pointing this out! I hadn't even considered filing separately, but good to know it would actually make things worse. We'll definitely file jointly. How do most people handle the withholding situation? We've never had to worry about this before since my SSDI wasn't taxable when I was single.

Most couples in your situation handle it by adjusting the working spouse's W-4 form to withhold additional taxes from their paychecks. It's the simplest approach. If your husband's employer has an online payroll system, he can probably update his W-4 electronically. He should check the box that indicates he has multiple jobs or a spouse who works, and/or add an additional amount to be withheld from each paycheck. The IRS has a Tax Withholding Estimator tool on their website that can help calculate the right amount.

Would HSA contributions work the same way? My company offers an HSA but not a great 401k.

Yes, HSA contributions work the same way! They're actually even better than 401k contributions for reducing your AGI because HSA contributions are "above-the-line" deductions. This means they reduce your adjusted gross income dollar-for-dollar, which directly impacts the SSDI taxation calculation. For 2024, you can contribute up to $4,150 for individual coverage or $8,300 for family coverage to an HSA. Since HSA contributions lower your combined income, they can potentially move you into a lower SSDI taxation bracket or reduce the amount that's subject to tax. Plus HSAs have the triple tax benefit - deductible going in, tax-free growth, and tax-free withdrawals for qualified medical expenses. Definitely worth maxing out if your company offers one!

This is really helpful advice about estimated payments! I'm actually in my first year of marriage too and dealing with similar SSDI tax concerns. One question - if we end up owing less than $1,000 when we file, do we still need to worry about underpayment penalties? I've heard there's a safe harbor rule but I'm not sure how it works when your tax situation changes dramatically like this. Also, do you know if there are any specific forms or worksheets the IRS wants us to use to calculate the taxable portion of SSDI? I want to make sure we're doing this correctly from the start rather than having to amend later.

You're right about the $1,000 safe harbor rule! If you owe less than $1,000 when you file your return, you generally won't face underpayment penalties regardless of how much you paid during the year. This can be really helpful in your first year of marriage when your tax situation changes significantly. For the SSDI calculation, you'll use the worksheet in the instructions for Form 1040 - it's called "Social Security Benefits Worksheet" and it's found in Publication 915. The worksheet walks you through calculating your "combined income" (AGI + nontaxable interest + half of Social Security benefits) and then determines what portion of your benefits are taxable based on the thresholds. Since this is your first year with this situation, I'd recommend running through the worksheet with last year's numbers as a practice run, then updating it with your current year estimates. That way you can get a good sense of whether you need to adjust withholding or make estimated payments. The IRS also has an online Tax Withholding Estimator that can help you figure out if your current withholding will be sufficient.

This is such a reassuring perspective, thank you! I've been losing sleep over this thinking we'd owe thousands in taxes. The way you explained it about the taxable portion being taxed at our regular bracket rate instead of 85% makes so much more sense. I'm definitely going to use that IRS Tax Withholding Estimator you mentioned - it sounds like exactly what we need to figure out how much extra to withhold from my husband's paychecks. And you're absolutely right about the higher standard deduction for married filing jointly - I hadn't even factored that into my panic calculations! One quick follow-up question: when using the Tax Withholding Estimator, should I input our expected income for the full year or just from when we got married? We got married in March, so I'm not sure if that affects how we should calculate everything.

For the Tax Withholding Estimator, you should use your full year expected income even though you got married in March. The IRS treats your marital status as of December 31st for the entire tax year, so you'll file as married filing jointly for the whole year. This actually works in your favor! Since you'll get the benefit of the married filing jointly standard deduction and tax brackets for the entire year, your effective tax rate will likely be lower than what you were expecting. Just make sure to include both of your full-year incomes (your husband's full salary and your full SSDI benefits) when running the estimator. The estimator will help you figure out if you need to adjust withholding for the remaining months of the year to avoid any surprises at tax time. Since you're already several months into the year, you might need to withhold a bit more per paycheck to catch up, but it should still be very manageable.