Deducting Disability-Related Expenses From Your Countable Income for SSDI or SSI
(Page 2 of 2 of How IRWEs Affect Social Security Disability)
Social Security won't count disability-related expenses that allow you to work when it determines whether you are making too much income to qualify for disability benefits. (To find out what expenses can be deducted, see our article on what counts as an impairment-related expense.)
How Expenses Are Deducted From Self-Employment Income
If you run your business or work for yourself, the SSA will deduct the following items from your net income (after your costs are paid) to calculate your "countable income":
- the value of any significant amount of unpaid help given to you by your spouse, children, or other people
- impairment-related work expenses, and
- unincurred business expenses paid for you someone else or by an agency.
The SSA does this for anyone who runs a business, provides services, freelances, consults, or makes money from a farm or rental properties.
Impairment-Related Work Expenses
IRWEs, such as the cost of special transportation or work accommodations, can reduce your "countable income," which can help you with your eligibility for SSDI or SSI disability or, for SSI, reduce the impact of your work on your existing SSI benefits. Note that, if you work at home, any cost for changes you make to your home can't be taken as IRWEs if they are taken as business expense deductions to come up with your net income.
Unincurred Business Expenses
Unincurred business expenses are those that are given to you free of charge by someone else. Examples of unincurred business expenses include free help from friends or family or equipment that is provided to you free of charge by an agency (like your state’s department of vocational rehabilitation). To be counted as an unincurred business expense, the item or service must be:
- an item or service that the IRS would let you deduct as a legitimate business expenses, and
- given to you free of charge.
Substantial Gainful Activity for the Self-Employed
If the SSA finds that the work you do running your business is substantial gainful activity (SGA), you will be denied SSDI or SSI disability benefits -- or could lose your SSDI, if you've already been approved. To assess whether you're doing SGA, the SSA will use tests that involve your countable income. (But if you've been receiving SSDI for less than 24 months, your countable income is just one factor in determining whether your self-employment is substantial gainful activity. You can learn more about the self-employment income tests by reading Can I Start a Small Business and Still Receive Social Security Disability Benefits?)
Here is an example of how IRWE and unincurred business expenses may affect initial eligibility for someone applying for disability benefits:
Amy owned a small floral business. She applied for SSDI after suffering a stroke that left her wheelchair-bound and with partial paralysis on her left side. Despite her condition, she continued to work about 20 hours per week in her business. After her regular business expenses were paid, Amy's net earnings from her business were $2,500 per month. She also had some disability-related expenses. She could no longer take public transportation or drive and so had to hire a specialty transportation service to get her to work. This service cost her $400 per month. She also had to hire an assistant care giver to help her dress and bathe in the morning. The assistant care giver cost her $150 per week. Amy's son helped out at the floral shop 20 hours per week and wasn't paid for his services. The value of his work was $200 per week. Her daughter helped her in the evenings at home, for no charge. Also, Amy had her interior doors in her house widened and her countertops lowered for easier access. These changes cost about $2,000.
Here are the only IRWEs and unincurred business expenses that can be used to calculate her countable income:
- IRWE exclusions: the cost of the transportation services ($400 per month) and the cost of the assistant care giver ($600 per month), and
- Unincurred business expenses: the value of her son's assistance ($800 per month).
A total of $1,800 could be excluded from her net earnings, leaving $700 in countable income. The SSA did not consider the cost of having her interior doorways widened or her countertops lowered because the claimant worked outside of her home. The result of her self-employment income analysis was that the claimant's self-employment did not count as substantial gainful activity because she was making only $700 in income; therefore, as long as she met all of the other income tests, her work wouldn't affect her eligibility for benefits.
Which Expenses Can Be Deducted From Your Wages
If you are employed by someone else, you are a "wage earner." The SSA allows wage-earners to deduct IRWEs when reporting their income; however, wage-earners cannot deduct unincurred business expenses.
How Disability-Related Expenses Affect Current SSI Recipients
When you are first applying for SSI, the SSA will determine whether you are earning substantial gainful activity; as discussed above, you can subtract IRWEs from your income to make your SGA low enough to qualify for for SSI (and unincurred business expenses if you run your own business).
Once you are approved for SSI, the SSA no longer considers SGA when determining your eligibility for benefits. However, if you do work, your earnings can affect your monthly benefit amount. This is because your payment amount is the difference between your "countable income" and the federal benefit rate (for 2017, the FBR is $735). IRWE exclusions can help defray the impact of your earnings. In addition to IRWE exclusions, the SSA also provides for other earned income exclusions. For more information on how SSI benefits are calculated, read our article How Much Can You Receive in SSI Disability.
Here is an example of how an SSI recipient's benefit amount would be impacted by IRWE exclusions:
Harry, an SSI recipient, was a wage earner who received SSI benefits based on intellectual disability. His gross wages were $819 per month, which he earned working part-time at a local grocery store. He had no other income. The recipient's impairment made it difficult to use public transportation, so he took a taxi to work. The taxi cost him $60 per week. The recipient also received free assistance with housekeeping and meals from a program that supported the mentally disabled to live independently. The value of this service was $150 per week.
Here is how the SSA would determine the recipient's SSI payments. The recipient's total IRWEs were $240 a month (the monthly cost of the taxi). The value of the free in-home services was not considered an unincurred business expense because the SSI recipient was a wage earner and not self-employed. It was also not considered income because it was provided by a state agency.
The recipient was also entitled to an earned income exclusion in the amount of $367 (the first $20 of his earnings, plus the first $65 of his earned income and 1/2 the amount of his earned income over $65). The total income exclusion ($240 + $367) was $607. This left his countable income at $212 ($819-$607). The difference between the FBR ($733) and his countable income ($212) was $521, which was his SSI benefit amount.
What If I Have More Questions?
If you are already getting benefits, contact the SSA for more information about whether you have any IRWEs. It may also be helpful to talk with an experienced disability attorney to see how your work could affect your eligibility for benefits. Arrange a free consultation with an attorney.