Getting Disability Benefits for Self-Employed: A Quick Guide

Social security disability benefits are usually granted to people who’ve worked in jobs that pay social security taxes.

But what if you’re a contractor or running your own business? Will you qualify for disability benefits if you’re self-employed?

Yes, self-employed individuals can definitely claim social security disability benefits. As long as you’ve paid social security taxes and/or meet the SSA’s eligibility requirements, your employment status won’t matter.

In fact, the SSA has pretty much similar eligibility requirements for both employed and non-employed individuals.

Know, however, that if you’re self-employed, your benefit amount will depend on your earnings from both regular and self-employment.

To help you better understand how disability for self-employed works, we prepared this quick guide:

Understanding Disability Benefits for Self-Employed Individuals

The SSA offers two types of benefits for both employed and self-employed individuals who can’t work due to a disability:

• Social Security Disability Insurance (SSDI)
• Supplemental Security Income (SSI)

Each of these benefits has different policies and eligibility requirements.

SSDI for Self-Employed Individuals

SSDI is meant for disabled people who have paid social security taxes. As such, to qualify for SSDI, you must:

• Have earned enough work credits. In general, you need at least 40 work credits, half of which must have been earned in the 10 years prior to your disability. Though younger individuals may still qualify even with lesser work credits.
• Have a medical condition that meets the SSA’s definition of disability. Your disability has lasted or is expected to last for at least a year or result in death.
• Have a disability that prevents you from working or engaging in any type of work. Your condition must prevent you from going back to your job or engage in any substantial gainful activity

Earning Work Credits

Just like employed individuals, you need to pay social security taxes to earn work credits.

As a self-employed individual, however, you will be taxed according to the Self-Employed Contributions Act (SECA). As such, your basic tax rate is equal to both the employer’s and employee’s portion of the FICA tax.

How much work credits you’ll earn will depend on your income. In 2023, you can earn 1 work credit for every $1,640 of earnings. This amount tends to change every year, so make sure to check the SSA’s site for the updated amount. Note, however, that you can only earn up to 4 work credits a year.

Substantial Gainful Activity for Self-Employed Individuals

Substantial gainful activity (SGA) is the level of work you can do to be considered “not disabled”. If the SSA determines that you’re engaging in SGA, your claim can be denied or your benefit payments may stop if you’re already receiving them.

For employees, the level of work is measured based on earnings. But if you are self-employed, the SSA will not base your level of work on your income alone.

Instead, they will evaluate your work activity based on the value of services you rendered to the business regardless of whether or not you received immediate income from it.

To determine if you’re engaging in SGA, the SSA will apply these three tests:

1. Are you rendering services that are significant to the operation of your business and are receiving a substantial income from it?
2. Is your work activity comparable to that of unimpaired individuals in your community who are engaged in the same businesses?
3. Is your work level worth the amount you’ll pay should you hire an employee to do your work for you?

If the answers to these tests are in the affirmative, then you are considered to be engaging in SGA. You can check out the full SSA guidelines on calculating the level of work for self-employed individuals if you want to learn more.

SSI for Self-Employed Individuals

If you haven’t paid SECA taxes or your work credits aren’t enough, you may still qualify for SSI benefits.

SSI is a needs-based benefit for disabled individuals. It doesn’t require you to earn any work credits, but your income must be below a certain threshold.

For 2023, the maximum income you can earn to qualify for SSI is $914 per month. If you’re married, your combined income should not be more than $1,371 per month. These amounts tend to change every year so make sure to check the SSA’s site for the latest amount.

Aside from having a limited income, you should also:

• be at least 65 years old or blind or disabled
• have limited resources and properties
• be a US citizen or a US national
• be residing in one of the 50 states, the District of Columbia, or the Northern Mariana Islands

Though SSI is a federal benefit, the amount tends to vary for each individual. You can get higher benefits if you live in a state that adds to the federal SSI payment. But pensions, prizes, and other countable income can reduce your SSI payment.