Tax season arrives each year, and many people have questions regarding their tax returns. That’s understandable. It can be a complicated process, particularly if you have special circumstances that may affect your tax status, like receiving disability benefits.
One of the questions we are often asked, particularly during tax season, is how the receipt of SSI or SSDI benefits may affect tax filing, payment, and refunds. These are certainly understandable questions. Let’s take a closer look at these issues together.
Can SSI Recipients Receive a Tax Refund?
This is one of the questions we are asked most frequently. The good news is that those who receive SSI or SSDI benefits can do so and still receive a tax refund. In fact, individuals who receive SSI may get a tax refund even if they don’t pay taxes, if they qualify for certain available credits like the child tax or earned income tax credit.
There are various tax credits that may be available for individuals who receive Social Security disability benefits, regardless of whether those are SSDI or SSI benefits. Unlike deductions, which reduce taxable income, tax credits reduce the actual amount of taxes that an individual has to pay. Even if an individual owes no taxes, earned income tax credit may still be collected after filing a tax return.
Two available tax credits for those with disabilities may include:
- Credit for children and dependent care
- Earned income tax credit
Let’s take a closer look together at each.
The Child Tax Credit
The Child Tax Credit is a tax benefit intended to support families raising children. Often, individuals who receive disability benefits like SSI may not have income sufficient to require the payment of taxes, but even in cases where no federal tax return is filed, families may still claim the Child Tax Credit.
To be considered as a qualifying child, a dependent typically must, among other factors:
- Be under the age of 17 at the end of the calendar year
- Provide no more than half of their own financial support each year
- Have lived with the caretaker claiming the credit for more than half of the year
- Be related to the caretaker (as a son, daughter, stepchild, eligible foster child, sibling, half-sibling, or a descendent of one of those individuals)
- Be properly claimed as a dependent on the tax return
- Be a U.S. citizen, U.S. national, or U.S. resident alien
- Have income below a certain threshold established by the IRS.
Those who qualify for the Child Tax Credit can receive up to $3,600 per qualifying child under the age of 6 and up to $3,000 for each qualifying child between the ages of 6 and 17. Up to half of the credit may be received through advanced monthly payments from the IRS. These payments won’t reduce the amount of SSDI or SSI benefits.
The Earned Income Tax Credit
The Earned Income Tax Credit is essentially a tax break for low and moderate-income workers. Those who qualify can use the credit to reduce the taxes owed—and potentially even result in a refund. The amount received will generally depend on earned income and the number of qualifying children.
Receiving SSDI or SSI benefits will not affect eligibility for the Earned Income Tax Credit.
Can You Claim a Dependent Who Receives SSI on Your Tax Return?
The short answer to this question is “yes,” – but often, as with so many legal matters, it can be complicated. While you will not necessarily be disqualified from claiming a dependent who receives SSI, there are additional rules to consider.
Typically, there are two legally recognized types of dependents for purposes of collecting SSI benefits:
- Qualifying Children
- Qualifying Relatives
Generally, if a dependent who collects SSI satisfies all of the necessary criteria, you can legally claim them. Doing so, however, also means accounting for these benefits when considering their living expenses. Without question, calculating benefits, filing tax returns, and claiming dependents can be complicated. As a result, it’s always best to consult a knowledgeable and experienced disability benefits attorney to guide you through the process. At Liner Legal, we’re here for you.
Liner Legal – Here For You
At Liner Legal, we know that disability benefits can be a vital source of financial support and stability for our clients. We also know that the law can be complicated and, at times, confusing. That’s why we’re here to provide clarity. We’re here to help you pursue the benefits you need and deserve. We’ll work tirelessly to ensure that you fully assert your rights, and we’ll always pursue the best legal strategies on your behalf. If you need us, we’re here for you. Give us a call today. We look forward to speaking with you soon.
