Do We Count Disability Income As Untaxed Income?

Award Year: 2024-25 KA-36690 Helpfulness Rating 1,702 page views

This guidance is specific to the 2024-25 award year and later.

It depends on whether it is taxable or untaxed income. Untaxed Social Security benefits, including Supplemental Security Income (SSI/disability) and Social Security Disability Insurance (SSDI) income are not reported as untaxed income on the FAFSA and they are not included in the calculation of the student aid index (SAI) or anywhere else in need analysis. Starting with the 2024-25 award year under the FAFSA Simplification Act, the same is true for all other untaxed disability benefits or income, such as non-SSI state disability benefits, Department of Veterans Affairs (VA) disability, and other untaxed disability income.

All taxable Social Security and other disability benefits, including any taxable SSI and SSDI, are included as taxable income in the adjusted gross income (AGI) on the FAFSA and in the SAI calculation. If part of the individual's Social Security benefits are taxable, the individual must file a 1040 tax return. If the individual was not required to file a tax return, the benefits are untaxed income and therefore not reported on the FAFSA. The individual uses IRS Publication 915 to determine whether or not Social Security benefits are taxable.

See also AskRegs Knowledgebase Q&A, Are Untaxed Social Security Benefits Considered Untaxed Income?

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