In Triage Cancer's free Quick Guide to Taxes and Disability & Retirement Benefits, you'll learn about the different benefits that may be available to you , if you have to pay federal or state income tax on your disability benefits, if you have to pay federal or state income tax on your Social Security retirement benefits, and about taxes and your pension and taxes and military benefits .
If you have been diagnosed with cancer and are considering retiring or applying for disability benefits, it is important to consider the potential tax implications of these options.
Based on your age, you may be eligible for retirement benefits. Retirement benefits typically come from the Social Security Administration (SSA), a private retirement account, or through an employer pension. If you are unable to work because of your medical condition, you may be eligible for disability benefits. You may have access to one or more of these options:
Social Security Retirement Benefits:if you paid Social Security taxes while you were working, you may be able to begin collecting Social Security retirement benefits. Your monthly retirement payment depends on what you have earned over your work history and when you decide to retire: at your full retirement age, before your full retirement age, or after your full retirement age.
Employer-sponsored Retirement Accounts:your employer may offer you a retirement plan that you can contribute to and your employer may also make matching contributions (e.g., 401k plan, SIMPLE IRA, etc.). Your employer may also offer you a pension plan that is funded by the employer and gives you a specific retirement benefit.
Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI):are federal programs that provide financial assistance to people with disabilities, who are unable to work because of their medical condition. Both administered by the SSA (Social Security Administration).
Private Disability Insurance:you may also have a private short-term or long-term disability insurance plan that you purchased directly from an insurance company or one that your employer offers you as an employee benefit.
VA Disability Benefits:VA disability compensation pays a monthly payment to Veterans who got sick or injured while serving in the military and also to Veterans whose service worsened an existing condition. You may qualify for VA disability benefits for physical conditions as well as mental health conditions.
For more information about the types of disability insurance, visit TriageCancer.org/DisabilityInsurance.
| Annual Income/Individual | Annual Income/Married Filing Jointly | Maximum Part of SSDI to be Taxed |
|---|---|---|
|
$0 - $25,000
|
$0 - $32,000 | 0% |
|
$25,000 - $34,000 $32,000 - $44,000 50%
|
$32,000 - $44,000 | 50% |
|
Greater than $34,000
|
Greater than $44,000 | 85% |
Whether you have to pay federal income taxes on your Social Security retirement benefits depends on: your IRS taxpayer filing status and the amount of your “combined income” (adjusted gross income, nontaxable interest, and half your Social Security retirement benefits). Generally, if a taxpayer has other sources of income and a combined income is more than a specified amount, Social Security retirement benefits are treated as income for federal tax purposes.
A majority of states exempt Social Security retirement benefits from state income taxes, but some do not, or may only partially exclude them. For all state tax considerations, check with your individual state for specific guidelines.
Pensions are taxed by the federal government. Note: Deferred compensation plans are different than a pension plan. You may have access to both. Employees can contribute up to $23,000 (in 2024) pre-tax to a qualified deferred compensation plan. The money that you contribute to a plan is not taxed as income when you put it into the account, but you do pay taxes when you withdraw the money from the account.
Depending on which state you’re in, you may have to pay state income tax on your pension. For all state tax considerations, be sure to check with your individual state for specific guidance.
Military retirement benefits are taxed by the federal government. Taxation under state guidelines varies. For state tax rules, be sure to check with your specific state to find out if they tax military retirement benefits.
For more information about these topics and more, visit TriageCancer.org .
Disclaimer: This handout is intended to provide general information on the topics presented. It is provided with the understanding that Triage Cancer is not engaged in rendering any legal, medical, or professional services by its publication or distribution. Although this content was reviewed by a professional, it should not be used as a substitute for professional services. © Triage Cancer 2024
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