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These plans areexcluded from tax on your federal return, but not onyour state income tax return. Once you retire and beginto receive pension benefits, you will pay federal tax onyour retirement payments, but you will not pay PA taxon those benefits.
In fact, yes â Social security disability benefits are taxable. However, most beneficiaries donât pay taxes on SSDI because they have very little (if any) additional income. Approximately one-fourth of SSDI recipients owed federal income taxes in 2015, usually because of their spouse or other household earnings.