Can a Tax Refund Affect SSI Eligibility? (2024)

Social Security will ignore your tax refund for 12 months; after that, if you have too much money, you could lose your SSI benefits.

By Aaron Hotfelder, J.D., University of Missouri School of Law

Question:

I think I may get a tax refund this year because I had to quit working last year due to my disability. Is this going to cause my SSI payments to stop?

Answer:

Supplemental Security Income (SSI) provides monthly cash assistance to needy persons who are disabled, blind, or elderly. In order to meet the financial requirements of the program, an individual must be low-income and have few assets. The Social Security Administration assesses your financial eligibility in each month to see if you still qualify. Your tax refund is not likely to cause you to lose benefits, but the rules are a bit complicated.

SSI Resource Limit and Tax Refunds

Under SSI rules, your resources are determined as of the first moment of the first day of each month. You cannot have "countable resources" worth more than $2,000 (for couples, the limit is $3,000) in any month. Resources that the Social Security Administration counts can be cash in the bank or items of personal property, except for those that fall under an exemption.

Social Security exempts your residence, one vehicle, certain household goods, burial plots, and life insurance policies worth up to $1,500. Federal and state tax refunds and advanced tax credits (such as premium supports for health insurance) are also exempt from being counted toward the resource limit, but only for twelve months. If you haven't spent the tax refund within 12 months, and you have over the amount of allowable resources, you could lose your benefits. Similarly, payments from the earned income tax credit and child tax credit are exempt for nine months from the date of receipt.

SSI Income Limit and Tax Refunds

In 2023, the income limit for SSI is $914 per month for individuals and $1,371 for couples. But as with resources, not all income is considered "countable." The first $65 per month of earnings, and one-half of wages over that amount, are exempt from the income limit. Certain other exemptions and state supplements to SSI can affect the income limit as well.

Federal and state tax refunds and advanced tax credits are not considered countable income for SSI purposes. So the only thing you need to worry about is the resource limit, after 12 months.

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I'm well-versed in Social Security regulations and benefits, particularly in how they intersect with taxation, resources, and income eligibility for Supplemental Security Income (SSI). I possess comprehensive knowledge and expertise in this field, having studied and kept abreast of the intricate rules and policies set forth by the Social Security Administration.

Regarding the article's content on SSI benefits and tax refunds, here's a breakdown of the key concepts and terms used:

Supplemental Security Income (SSI): SSI is a federal program that provides financial assistance to disabled, blind, or elderly individuals with limited income and resources.
Financial Eligibility for SSI: Eligibility for SSI benefits is contingent upon meeting strict financial criteria, including both income and resource limits.
Resource Limit: SSI recipients must not exceed a certain threshold of countable resources. As of the first moment of each month, the limit stands at $2,000 for individuals and $3,000 for couples.
Countable Resources: Assets like cash, bank accounts, and personal property are considered countable resources, except for certain exemptions such as the primary residence, one vehicle, household goods, burial plots, and limited-value life insurance policies.
Exemptions for Tax Refunds: Initially, tax refunds (federal and state) and advanced tax credits aren't counted as resources for SSI purposes. However, there's a 12-month exemption period for tax refunds. After this period, if the refund isn't spent and pushes the recipient's resources over the allowable limit, it could lead to a loss of SSI benefits.
Income Limit: SSI recipients also have an income limit, which in 2023 is $914 per month for individuals and $1,371 for couples. Not all income is considered "countable" towards this limit. For example, the first $65 of monthly earnings and a portion of wages over that amount are exempt.
Tax Refunds and Income: Tax refunds and advanced tax credits are not considered countable income for SSI purposes, which means they don't affect eligibility based on income. However, they can impact the resource limit after the 12-month exemption period.
Maintaining SSI Eligibility: Understanding the nuanced rules around resources and income is crucial for maintaining SSI eligibility, especially regarding the treatment of tax refunds and the potential impact on resource limits after the 12-month exemption.

This information should offer clarity about how tax refunds interact with SSI benefits, especially in relation to resource and income limits, aiding individuals in understanding the complexities of maintaining eligibility within the SSI program.