Can You File Taxes on SSI Disability with Dependents?

Disabled individuals receiving Supplemental Security Income (SSI) often ask whether or not they need to, or even can, file taxes while receiving SSI disability benefits. In many cases, someone receiving SSI benefits who has a dependent can qualify to receive tax credits or other deductions if they file a tax return, even if they are not required to do so. There are also some SSI recipients who may be legally required to file a tax return.

At Sackett and Associates Disability Law Office, we have extensive experience helping people with disabilities with questions related to their disability benefits. If you have questions about your disability benefits and how they affect your tax filing, contact our office today.

In this article, we’ll explain the tax obligations and the opportunities that apply to SSI recipients who have dependents.

Understanding the Purpose of SSI Disability Benefits

Supplemental Security Income (SSI) is a program administered by the Social Security Administration (SSA) designed to provide financial assistance to individuals who are disabled, blind, or aged 65 and older, and have limited income and resources. Those who receive SSI benefits are eligible only if they meet strict financial guidelines, including a monthly countable income cap of $943 and limited available resources.

Unlike Social Security Disability Insurance (SSDI) or retirement benefits, SSI is funded by general tax revenues, not Social Security taxes.

Are SSI Disability Benefits Taxable?

SSI disability benefits are not taxable income. The Internal Revenue Service (IRS) does not consider these benefits as taxable income, primarily because they are meant for individuals with limited income and resources. That is why recipients of SSI benefits typically are not required to file a federal tax return solely based on their receipt of SSI benefits.

Filing Taxes with Dependents May Benefit You

For SSI recipients with dependents, the situation requires a closer examination. Even though SSI benefits themselves are not taxable and usually do not necessitate filing a tax return, there may be circumstances under which an SSI recipient would need or benefit from filing a tax return. These circumstances often revolve around additional income, tax credits, and deductions.

Additional Income

If an SSI recipient has additional income besides their SSI benefits—whether from a part-time job, investments, SSDI benefits for themselves or their dependents, or any other source—that income may be taxable. The IRS requires that anyone with income above certain thresholds file a tax return. The thresholds vary depending on filing status, age, and the type of income received. So, if the combined income, including that of dependents, surpasses these thresholds, filing a tax return becomes necessary.

Tax Credits and Deductions

Filing a tax return may also be beneficial for SSI recipients with dependents due to certain tax credits and deductions that can lead to refunds or lower tax liabilities. Some of these include, but are not limited to the following:

1. Earned Income Tax Credit (EITC): This is a refundable tax credit for low- to moderate-income working individuals and families, particularly those with children. The credit amount varies by income, filing status, and number of children. You can get this tax credit in the form of a tax refund if the credit is larger than the tax you owe. If you qualify, you may also get this credit as a tax refund even if you owe no taxes.
2. Child Tax Credit (CTC): This is a credit for each qualifying child, which can reduce a taxpayer’s liability and, depending on the taxpayer’s income, may be partially refundable. This refundable credit may also be available to SSI recipients with dependents even if they had no income. Each child must qualify under the IRS rules to merit the CTC. Generally, that means they must be under age 17, be claimed as a dependent of the person filing, and meet certain residency requirements. This credit may also be available to children with disabilities who are claimed as dependents, regardless of their age.
3. Child and Dependent Care Credit: For expenses related to the care of a qualifying individual to allow the taxpayer to work or look for work. This credit cannot result in a refund but is may reduce your tax liability if you and the dependent person qualify.
4. Education Credits: Such as the American Opportunity Tax Credit or the Lifetime Learning Credit, for eligible education expenses.

How to File

For SSI recipients deciding to file a tax return, either because of additional income or to claim credits and deductions, the process is similar to that of any taxpayer. You can file electronically or submit a paper return. Free tax preparation assistance is also available for qualifying individuals through the IRS’s Volunteer Income Tax Assistance (VITA) program and the Tax Counseling for the Elderly (TCE) program.

Professional Advice

Given the complexity of tax laws and the unique circumstances of each individual, SSI recipients with dependents will benefit from consulting a tax professional. This is particularly true for those with additional income or who may determine if they qualify for tax credits and deductions. You may also contact Sackett and Associates Disability Law for information.

While SSI disability benefits are not taxable and do not, in themselves, necessitate filing a tax return, there are scenarios under which SSI recipients with dependents might need or benefit from filing. Whether you earned some additional income that requires you to file or because tax credits and deductions could reduce your tax liabilities or result in refunds, it’s important to understand the rules that apply to your individual situation.