SSI Benefits & Taxes

Supplemental Security Income helps disabled, blind or elderly individuals who have low resources and income. SSI is not Social Security and does not have the same rules. SSI recipients need funds for food and a place to live, but they must follow the law. Surprises like federal income taxes can wreck the budget for the SSI recipient. Although you may owe taxes on other income, the Internal Revenue Service does not tax SSI benefits.

Earned Income

SSI recipients may have other income, both earned and unearned, and continue to qualify for SSI benefits. The IRS may tax this income, and the SSI recipient may need to file a federal income tax return. In 2011, you may earn $65 each month that is exempt from SSI calculations, but you may earn about $1,400 a month before your earnings offset all of your SSI benefits. Your earned income during the year may require filing a federal income tax return.

Unearned Income

Unearned income includes interest on bank accounts, Social Security benefits and even lottery winnings. Social Security does not count the first $20 of unearned income in SSI benefits calculations, but a recipient may have $694 in unearned income before unearned income offsets all SSI benefits in 2011. The IRS requires reporting and filing a federal income tax return for unearned income over a specified amount. Do not include your SSI benefits.

Some states supplement the basic SSI benefit, but most states base state income taxes on the federal model so you do not pay state taxes on SSI benefits.

IRS

The IRS provides guidelines for filing a federal income tax return each year, and individuals under the required filing amounts may choose to file a tax return as well. If you earned income during the year and had taxes withheld from your paycheck, you may get some or all of the withholding returned to you with filing a tax return. If you can qualify for a tax credit, you may also choose to file a federal income tax return. You cannot use SSI benefits for tax credits like the earned income credit.

Filing

If your earned income was over $5,700 or your unearned income was over $950 in 2010, you may need to file a federal income tax return. Filing requirements depend on variables like your age and whether someone claims you as a dependent on her tax return. Self-employed individuals can make $400 before the IRS requires filing a tax return. You must file a federal income tax return if you make more than $108.28 working for a church. Even at these low amounts, income from these sources requires filing a federal tax return. You do not owe taxes on SSI and do not have to report SSI benefits as income on your federal tax return.

References

• Social Security Online: Understanding Supplemental Security Income
• IRS: Publication 907 - Tax Highlights For Persons With Disabilities
• Center on Budget and Policy Priorities: Introduction to Supplemental Security Income
• IRS: Publication 17 - Your Federal Income Tax for Individuals 2010
• IRS: Disability and Earned Income Tax Credit

Resources

• Social Security Online: Understanding Supplemental Security Income