If you’re receiving Social Security Disability Insurance (SSDI), you may still be eligible for the Earned Income Tax Credit (EITC) in certain situations. The EITC is a refundable credit designed to help workers with low to moderate income. Here’s what you need to know:
EITC basics:
The EITC is a credit that reduces the amount of tax you owe and may result in a refund. Eligibility depends on your earned income, adjusted gross income (AGI), filing status, and number of qualifying children. For tax year 2024 (the rules can change year to year), workers with earned income may qualify even if they also receive SSDI benefits, but SSDI benefits themselves are not considered earned income.
What counts as earned income?
The difference between EITC and other credits such as SGA limits, TWP, etc depend on the time and type of work allowed by the SSA. Earned income typically includes wages, salaries, tips, and other compensation you receive from working for someone or from your own work (self-employment). SSDI benefits do not count as earned income for EITC purposes. However, you can still have earned income from other work you do in the year.
Qualifying criteria (high level):
- You must have earned income from working (not just from SSDI).
- Your AGI and income thresholds depend on your filing status and number of qualifying children.
- You must file a tax return to claim the EITC, even if you are not otherwise required to file.
- You cannot be a qualifying child of another person for the purposes of the EITC.
- Investment income must be below certain limits.
Credit amounts and thresholds:
The EITC amount varies by earned income, filing status, and the number of qualifying children. There are specific maximums and phaseout ranges that change annually with inflation adjustments. If your earned income is within the eligible range and you meet the other criteria, you may receive a substantial credit.
How to claim the EITC:
- File a federal tax return and attach Schedule EIC if you have qualifying children, or use the EITC lines on the Form 1040/1040-SR with the EITC calculation.
- If you have no qualifying children, you may still qualify for the EITC with a simple earned income amount and meeting other criteria.
- Consider using tax preparation software or consulting a tax professional who can verify eligibility and ensure you claim the credit correctly.
Medical expenses and other deductions:
While the EITC is separate from deductions, remember that deductions (like the standard deduction or itemized deductions for medical expenses, state and local taxes, mortgage interest) can lower your AGI and overall tax liability, potentially affecting your eligibility for other credits, including the EITC. Substantial medical expenses relative to income can be deductible if you itemize, which may influence your taxable income.
Important cautions:
- Eligibility rules can be nuanced; the presence of SSDI does not automatically guarantee EITC eligibility, and the interaction between earned income, AGI, and filing status matters.
- The EITC credit amount is sensitive to income thresholds that change yearly; always check the current year IRS guidelines or use IRS tools (like the EITC Assistant) to confirm eligibility.
Practical steps if you think you might qualify:
- Gather your W-2s, 1099s, and records of any self-employment income.
- Check whether you have any qualifying children and your filing status.
- Use the IRS EITC Assistant or tax software to estimate eligibility and potential credit amounts.
- File a federal tax return to claim the EITC, even if you don’t owe tax.
If you think calculating your own EITC and filing for SSDI benefits is overwhelming, do not stress. You can simply get expert legal guidance from our disability attorneys at Law Office of Irene Ruzin for a smooth, stress-free process to winning & keeping your SSDI benefits.
