Navigating the complexities of taxes can be daunting, especially when dealing with Social Security Disability Benefits (SSDI). This guide simplifies how SSDI impacts taxes, specifically for residents in Colorado.

Are SSDI Benefits Taxable?

Yes, but it depends on your total income. To figure out if your SSDI benefits are taxable, follow these steps:

  1. Calculate Income: Add half of your SSDI benefits to your other income sources. This total determines if your benefits are taxable.
  2. Income Thresholds: The IRS sets income limits. For a single person, this limit is $25,000, and for a married couple filing jointly, it’s $32,000.
  3. Colorado’s Stance: Colorado is one of the few states that tax SSDI benefits. However, the state offers exemptions based on age, income, and total taxable and non-taxable income​​.

Tax Breaks for Coloradans

Colorado provides certain breaks for those receiving pensions or annuities, including SSDI recipients:

  • Age Matters: If you’re 55 or older, you qualify for a pension/annuity subtraction.
  • Subtraction Amounts: Those under 65 can subtract up to $20,000 or their taxable pension income, whichever is smaller. If you’re 65 or older, the limit increases to $24,000. Moreover, for those aged 65 and above, if your social security benefits exceed $24,000, you can subtract the full amount of these benefits on your Colorado tax return.
  • Claiming the Subtraction: Qualifying individuals should use the 2022 Subtractions from Income Schedule (DR 0104AD) to claim this benefit​​.

When to Seek Professional Help

While this guide aims to simplify tax considerations for SSDI recipients in Colorado, tax laws are complex and can change. It’s always wise to consult a licensed tax professional for personalized advice.