How to Claim the Earned Income Tax Credit When You Receive Disability Benefits

The EITC counts disability income differently depending on the source

The Earned Income Tax Credit (EITC) is a refundable tax credit for people with low to moderate income, and whether you can claim it while receiving disability benefits depends almost entirely on what kind of disability income you have. Social Security Disability Insurance (SSDI) does not count as earned income for EITC purposes, so receiving SSDI does not reduce your EITC or disqualify you. Supplemental Security Income (SSI), however, also does not count as earned income — but SSI has strict resource limits that can affect whether you are may be able to access for other programs. If you have work income in addition to disability benefits, that work income is what determines your EITC.

The key distinction is between earned income (wages, self-employment income, certain disability payments) and unearned income (SSDI, SSI, investment income). The IRS looks only at earned income to calculate the EITC, so your disability benefits themselves do not reduce the credit you can claim based on work you have done.

Key Takeaways

• SSDI and SSI do not count as earned income, so receiving either one does not reduce or eliminate your EITC may be able to access based on disability alone.
• If you work part-time or full-time while receiving disability benefits, your wages are what the IRS uses to calculate your EITC — not your disability payments.
• You report your earned income on Schedule EIC (Form 1040 Schedule) and your tax return; disability benefits go on a separate line and do not affect the credit calculation.
• If you receive both SSDI and work income, you may be may be able to access for a higher EITC than someone with the same wages but no disability benefits, because your household income is lower.

How the IRS counts income when you have SSDI

Social Security Disability Insurance is not taxable income and does not count toward the EITC calculation. This means if you receive $1,200 per month in SSDI and earn $15,000 per year from part-time work, the IRS sees your earned income as $15,000 — not $15,000 plus $14,400 in SSDI. Your EITC is calculated on the $15,000 alone.

This can actually work in your favor. If you have a spouse or dependent children, your household's total earned income determines your EITC amount. Because SSDI does not count, a household with SSDI plus modest work income may may have access to for a larger EITC than a household with the same total money coming in but no disability benefits. For example, a single parent with $20,000 in work income and $12,000 in SSDI has a lower "earned income" figure than a single parent with $32,000 in work income alone, so the EITC calculation may be different.

How the IRS counts income when you have SSI

Supplemental Security Income also does not count as earned income for EITC purposes. Like SSDI, SSI payments do not reduce your EITC or count toward the income limits. However, SSI has strict rules about how much money you can have in savings and other resources, so claiming the EITC itself does not create a problem — but receiving a large EITC refund might.

If you receive SSI, a large tax refund can push your resources over the SSI limit (currently $2,000 for an individual, $3,000 for a couple). Some people with SSI set up a ABLE account (Achieving a Better Life Experience account) to hold the refund without affecting SSI may be able to access, or they arrange to have the refund sent to a representative payee who can manage it. Talk to your SSI caseworker before filing if you expect a refund larger than a few hundred dollars, because they can tell you what your specific resource limit is and what options exist in your state.

Reporting work income on your tax return

You report earned income on your tax return the same way whether or not you receive disability benefits. Wages go on Form 1040, line 1a (or on Schedule C if you are self-employed). Disability benefits — whether SSDI or SSI — do not go on the earned income lines at all. SSDI appears on Form 1040, line 5b, but it is not counted in the EITC calculation. SSI does not appear on the federal tax return.

To claim the EITC, you will file Schedule EIC (Form 1040 Schedule) along with your Form 1040. This schedule asks for your earned income, your filing status, and information about any may have access to children. The IRS uses this information to calculate your credit. You do not need to mention your disability benefits on Schedule EIC — the form only looks at earned income.

If you have questions about how to report your specific situation, the IRS Free File program offers free tax preparation for people with income below a certain threshold, and many local nonprofits offer free tax help through the Volunteer Income Tax Assistance (VITA) program. Both can walk you through reporting disability income correctly.

When you work while receiving disability benefits

If you are on SSDI and working, you may be in a trial work period or using other work incentives that allow you to earn money without losing your benefits immediately. Social Security has specific rules about how much you can earn before your benefits are affected, and these rules change depending on which program you are on and how long you have been working.

Your work income still counts fully toward the EITC, even if Social Security is reducing your benefits because you earned too much. The EITC does not have the same earnings limits that SSDI does. This means you could be earning enough to lose some SSDI benefits but still receive a substantial EITC refund. Keep records of all your wages, because you will need them for both your Social Security report and your tax return.

If you are self-employed while on disability, report your net self-employment income on Schedule C and then on Schedule SE. This income counts toward both your EITC and your Social Security earnings report. Self-employment income can be more complex to report, so consider using VITA or a tax professional if you are unsure.

EITC income limits and how disability benefits affect them

The EITC has income limits that change each year. For 2024, the maximum earned income to may have access to ranges from about $16,000 (no children) to about $57,000 (three or more children), depending on your filing status and number of dependents. These limits are based on earned income only, so your SSDI or SSI does not count toward the limit.

This means a person receiving $15,000 in SSDI and $10,000 in work income is within the income limit, even though their household receives $25,000 total. Someone with $25,000 in work income alone might be over the limit or in a different phase of the credit. Because disability benefits do not count, your household's earned income is lower, which can keep you within the EITC range or move you into a higher credit amount.

The IRS updates income limits annually, usually in late 2023 for the 2024 tax year. You can find current limits on the IRS website or ask a tax preparer to confirm your household's limit before you file.

Frequently Asked Questions

Does receiving SSDI or SSI disqualify me from the EITC?

No. Neither SSDI nor SSI counts as earned income, so receiving either one does not disqualify you from the EITC. You can claim the credit based on any wages or self-employment income you have. The credit is designed for people with low earned income, and disability benefits do not change that calculation.

What if I received a large EITC refund and I am on SSI?

A large refund can push your resources over the SSI limit. Contact your SSI caseworker before filing to discuss options. Many states allow ABLE accounts to hold refunds without affecting benefits, or you can arrange for a representative payee to manage the money. Planning ahead prevents complications with your SSI.

Do I have to report my disability benefits on my tax return?

SSDI appears on Form 1040 but is not taxable and does not affect your EITC. SSI does not appear on the federal tax return at all. You only report your earned income (wages or self-employment) on the lines used for EITC calculation. Disability benefits go elsewhere on the form or do not appear.

Can I claim the EITC if I work part-time and receive disability?

Yes. Your part-time wages are your earned income for EITC purposes. The credit is based on how much you earned, not on how many hours you worked or whether you also receive benefits. Part-time work income qualifies the same way full-time income does.

What if Social Security says I earned too much and reduced my benefits?

Your work income still counts fully toward the EITC, even if Social Security reduced your SSDI because you earned above the limit. The EITC and SSDI have different earnings rules. You report the full amount you earned on your tax return, and Social Security reports it separately to determine your benefit amount.