earned income

Are Social Security Disability Benefits Earned Income?

The recipients of Social Security disability benefits receive payments each month from the Social Security Administration. These funds function much like income. This raises the following question: are Social Security disability benefits earned income? In this article, we address the tax implications of Social Security disability benefits. For additional information on this issue, please contact a Texas SSDI and SSI attorney.

Earned Income

Earned income is the money a person makes from working, and it includes wages, tips, and salaries. With a few exceptions, most earned income is taxable. Fortunately for those who receive Social Security disability benefits, such benefits are not counted as earned income for tax purposes. 

Unearned Income

Unearned income is money that a person receives that isn’t a result of employment. Examples of unearned income are

  • interest and dividends,
  • Social Security disability benefits,
  • retirement income,
  • spousal support,
  • child support, and
  • unemployment.

Individuals with unearned income must still report such income when filing taxes, even if such income isn’t taxable. 

Are Social Security Disability Benefits Taxed?

A person’s income besides disability payments determines whether Social Security disability benefits are taxed. An individual’s disability benefits are considered in combination with income from investments, taxable disability plans, and pensions by the IRS. The total amount a person may earn before Social Security disability benefits are taxed changes each year. 

SSI vs. SSDI Taxation

Supplemental Security Income (“SSI”) benefits are reserved for people with low income. Therefore, most people who receive SSI aren’t taxed on any of their income. However, people who receive Social Security Disability Insurance (“SSDI”) benefits and have significant income from other sources may be taxed on up to half of their SSDI benefits.

Disability Benefits and the Earned Income Tax Credit

The Earned Income Tax Credit is a tax credit that is available to low-income earning individuals and families. Since disability benefits are not considered earned income, they can’t be used to claim the Earned Income Tax Credit. In order to claim this tax credit, an individual must work and earn taxable income. 

Help with Social Security Disability Benefits

Navigating the Social Security disability benefits laws and the IRS tax laws can be difficult. Therefore, for questions regarding earned income and Social Security disability benefits, it is recommended that you contact an El Paso Social Security disability benefits attorney. 

Contact Our El Paso Social Security Disability Benefits Attorney 

If you need assistance with Social Security disability benefits, you should contact a Texas SSDI and SSI attorney as soon as possible for assistance. When you contact attorney Jon Sipes to work with you on your SSDI or SSI claim, he will do everything in his power to ensure that your Social Security disability claim is a success. Jon Sipes regularly helps people obtain benefits under the SSDI and SSI programs. If you’re ready to get started, contact us today to schedule a consultation.