Many people receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) want to know if they can continue working for themselves without losing their benefits. The short answer is yes, you can be self-employed and still receive disability benefits, but you must follow specific rules and report your income accurately.
The Social Security Administration (SSA) understands that returning to work or running your own business can be a positive step toward financial independence. To encourage this, SSA has programs and protections like work incentives and the Ticket to Work program that allow beneficiaries to earn income while keeping their benefits under certain limits.
Let’s break down how self-employment affects SSI and SSDI and what you need to know to protect your benefits.
Understanding Self-Employment and Disability Benefits
Self-employment is any work where you operate your own business, freelance, or provide services without being a traditional employee. Instead of receiving a paycheck, you earn net income from your business after deducting business expenses.
For Social Security purposes, self-employment is treated differently than traditional employment. The SSA looks at how much you earn and how much work you perform to determine whether your business activity counts as Substantial Gainful Activity (SGA).
How the SSA Evaluates Self-Employment for SSDI
If you receive SSDI, SSA doesn’t just look at how much you earn but also how much you contribute to your business. Because self-employed individuals can control their income and working hours, SSA uses a special set of tests to evaluate whether your work shows that you can perform SGA.
Here are the three main tests SSA uses:
1. The Significant Services and Substantial Income Test
This applies if you are the only person operating your business or if you contribute a significant amount of work to it. SSA reviews whether your services are essential to the operation and if your income is substantial compared to what you’d earn doing similar work.
2. The Comparability Test
If your income is below SGA, SSA compares your work activity to that of non-disabled individuals in similar businesses. If your level of effort, responsibility, and hours are similar, SSA may still consider it SGA.
3. The Worth of Work Test
SSA may determine that the value of your work, what it would cost to hire someone else to do it, is worth more than the SGA limit. Even if your income is low, your contribution may show you can work at a substantial level.
These tests are used during a Trial Work Period (TWP) and Extended Period of Eligibility (EPE) to evaluate your ongoing eligibility for benefits while self-employed.
How the SSA Evaluates Self-Employment for SSI
For SSI recipients, self-employment income is counted differently. Since SSI is based on financial need, your net earnings from self-employment (NESE) are what matter. SSA calculates NESE by taking your gross business income and subtracting necessary business expenses.
If your NESE is below the income limits for SSI, you can usually continue receiving benefits, although the amount of your monthly payment may be reduced based on your countable income.
For instance, if you earn $1,200 from your small business but spend $600 on materials, your NESE would be $600. SSA then applies certain exclusions (like the first $85 of earned income) before reducing your SSI payment.
Work Incentives for Self-Employed Beneficiaries
The SSA offers several work incentives to help self-employed beneficiaries succeed while protecting their benefits. These include:
1. Impairment-Related Work Expenses (IRWE)
You can deduct costs for items or services you need to work because of your disability. This may include assistive devices, special transportation, or medical supplies.
2. Business Expense Deductions
Legitimate business expenses; like equipment, software, rent, or supplies, can reduce your net income, lowering how much SSA counts against your benefits.
3. Trial Work Period (TWP)
If you’re on SSDI, you can test your ability to work for at least nine months while continuing to receive full benefits, regardless of how much you earn.
4. Extended Period of Eligibility (EPE)
After your TWP, you have a 36-month period during which SSA can restart your benefits if your earnings drop below the SGA limit without requiring a new application.
These incentives make self-employment a viable and flexible option for many disability beneficiaries.
Reporting Your Income as a Self-Employed Beneficiary
You must report all income and business activity to SSA to stay compliant and avoid overpayments or benefit suspension. You will want to file taxes and consult with a tax professional (tax preparation service or Accountant) regarding how to report business income & expenses.
When reporting, include:
- Gross income from your business
- Business expenses
- Hours worked and type of services provided
- Any major changes in your business operations
SSA may ask for documentation like tax returns, invoices, receipts, or profit-and-loss statements to verify your activity.
Can Self-Employment Affect Medical Coverage?
If you’re receiving SSDI, you can often keep your Medicare coverage for several years after you return to work, even if your cash benefits stop due to earnings. Similarly, SSI recipients may continue receiving Medicaid through special work incentives like Section 1619(b).
This means you can continue to receive essential healthcare coverage while building your business or returning to part-time work.
Returning to Work Safely Through the Ticket to Work Program
The Ticket to Work program is a free, voluntary program that helps SSDI and SSI beneficiaries transition back into the workforce. It provides access to vocational training, job placement support, and career counseling while protecting your benefits.
If you are self-employed, you can still use the Ticket to Work program to receive guidance on growing your business, managing your income, and staying compliant with SSA rules.
By assigning your Ticket to an approved Employment Network, you can access personalized assistance to help you reach your goals safely and confidently:
- You can be self-employed and still receive benefits available through the Ticket to Work program.
- SSA evaluates not just your income but also your effort, time, and the value of your work.
- Work incentives like IRWE, PASS, and TWP help protect your benefits while you explore business opportunities.
- Always report your income, business expenses, and changes in work activity to SSA.
- We can help guide you through these rules, so you can focus on your goals without risking your benefits.
If you’re self-employed or considering starting a business while receiving disability benefits, you don’t have to navigate the process alone. We provide free guidance to help you understand your options, report your earnings correctly, and take advantage of SSA programs like Ticket to Work.