What Disability Benefits Qualify as Earned Income for EITC?

The Earned Income Tax Credit (EITC) is a tax credit for people filing head of household, married filing jointly, single or as a qualifying widower who have adjusted gross incomes not exceeding specific yearly income limits as established by the IRS.

Earned Income for EITC and Disability Benefits

The Internal Revenue Service (IRS) does not consider disability benefits as earned income. Therefore, people on SSI or SSDI cannot claim the earned income tax credit. The IRS considers earned income as wages that you have paid federal, state and local taxes on. However, the IRS does classify disability retirement payments as earned income until the recipient of disability retirement benefits reaches their minimum retirement age. This is the earliest age an individual could have received an annuity or pension if they had not become disabled.

Can Someone Receive Disability Benefits and Qualify for the Earned Income Tax Credit?

In some cases, yes. A person receiving SSDI or SSI who is filing a joint return with a working spouse may qualify for the EITC. Additionally, working individuals who fall within the income guidelines for claiming their earned income for EITC can claim a disabled child regardless of the child’s age if the child is totally and permanently disabled.

Can EITC Refunds Affect Disability Benefits?

Refunds received from the Child Tax Credit or the Earned Income Credit will not affect disability payments because tax refunds are not considered “earned” income.

If you receive SSDI or SSI and are having difficulty understanding tax laws regarding your benefits, contact Decker Law Firm today for immediate assistance from an experienced disability lawyer. You could be missing out on taking advantage of the earned income tax credit without realizing it. Call today to schedule an appointment about disability benefits and the EITC.