Unlike what most people believe, lottery winnings do not affect your social security disability benefits (SSDI). But it can reduce or totally cut your Supplemental Security Income (SSI).
That’s because SSDI is an earned benefit. You got it because you paid social security taxes and have proven that you are disabled. SSI, on the other hand, is a needs-based benefit. It’s paid to disabled individuals who have limited income and resources and haven’t paid enough social security taxes.
Because of this, non-work related earnings like lottery winnings do not count as income under SSDI. While an SSI recipient’s financial capacity will obviously be improved if they win the lottery. This means they are not anymore in need of aid from the government. If you won the lottery while receiving SSI, your benefits may stop temporarily. But it can resume again once your resources have fallen below the SSA’s income limit.
In this post, we’ll answer your questions about winning the lottery (or any monetary prize) while on social security.
What Happens If You Win Money While on Benefits?
Winning the lottery or other monetary prizes will obviously make life a little better, especially if you can’t work. But if you win money while on benefits, you may have to give up the latter depending on:
- the type of benefits you’re receiving
- your total winnings
- your regular monthly income
As I said, lottery winnings and monetary prizes won’t affect SSDI benefits. It will only matter if you’re receiving SSI benefits. Other benefits like food stamps and state-sponsored financial assistance might get affected too.
If your winnings are too small to significantly impact your income, it most likely won’t affect your benefits. For instance, a $10 prize isn’t gonna make you lose your benefits. It’s not even enough to buy a full day’s meal, much less make you rich enough not to need government aid.
Your monthly income, excluding your winnings, will also matter. If you’re already earning close to the income ceiling, even a small lottery win can bring you over the limit. When that happens, the SSA will either reduce or stop your SSI payments.
Why Lottery Winnings Won’t Affect SSDI
SSDI benefits are given on the assumption that your disability prevents you from working. If you get back to work and are earning more than the SSA’s limit, you are considered to be engaged in a Substantial Gainful Activity (SGA). When this happens, your SSDI benefits will stop.
This is why if you’re receiving SSDI benefits, the SSA won’t care about your unearned assets. It only takes into account income earned from working, which includes:
- earnings from self-employment
- workers compensation
- other government benefits
- pensions from private insurance providers
Unearned income such as gambling winnings, dividends, interests, and spousal income is not counted as SSDI income.
How Lottery Winnings Can Affect Your SSI Benefits
For SSI purposes, the SSA defines income as:
anything you receive during a calendar month and can use to meet your needs for food or shelter. It may be in cash or in kind.
This explains why lottery winnings are considered income if you are receiving SSI. You can use it to pay rent, buy food, and other needs.
The SSI income limit changes each year. For 2023, the maximum income you can earn is $914 per month. But if you’re married, you can earn up to $1,371 monthly. That’s also the maximum SSI benefit you can receive per month. If you have other sources of countable income for that month, they will be deducted from your benefits.
Since lottery winnings are considered income under SSI, they will be deducted from your total SSI payment. This means that if your total income (including your lottery winnings) exceeds the SSA’s limit, you won’t receive SSI for that month.
The good news is SSI income is evaluated on a monthly basis. Once your income and resources fall below the SSA limit, you can receive SSI benefits again.
Let’s say you won $2,000 last month and spent it all on repairing your home. Obviously, it won’t anymore be a part of your income and resources for this month. If you have no other sources of income, the SSA will most likely resume your SSI payments.
How About Your Retirement Benefits?
Just like SSDI, social security retirement benefits are earned benefits. This means winning the lottery will have no impact on your retirement benefits. But it may impact your taxes on your benefits since lottery winnings have to be reported to the IRS.
Should I Report My Winnings?
Yes, you should. It doesn’t matter if you’re receiving SSI, SSDI, or retirement benefits.
Lottery winnings are reported to the IRS and, in turn, will be seen by the SSA. If you do not report and explain the source of this income, it might get you into trouble with the SSA. Worse, they may count it as part of your earnings for the month.
If you’re receiving SSI, then that’s all the more reason to report your lottery winnings. When the IRS informs the SSA of your lottery earnings, you may get charged with overpayment. You will have to return all the SSI payments you received in the months you are not eligible for SSI.
If You Win the Lottery, Do You Have to Pay Back Medicaid?
In general, you won’t have to pay back your Medicaid costs if you win the lottery. But, just like with SSI, it can affect your eligibility for Medicaid.
You see, eligibility for Medicaid varies per state and is usually tied to SSI. Obviously, it also has income requirements. If your lottery winnings are substantial enough to bring your income over the SSA limit, you can lose your Medicaid benefits.
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About The Author
Judy Ponio is a writer and editor for the Victor Malca Law P.A. website and blog. She enjoys helping people in need with questions about social security disability and workers compensation law. She has a passion for helping those in need and the elderly with accurate legal information that can make a positive difference in their lives.