The amount of money you and/or your family members receive from Social Security Disability (and from Social Security Retirement) will depend on your Primary Insurance Amount (PIA). To calculate your PIA, Social Security figures the number of years you worked, how much you earned, and your Social Security’s wage base during each year. Benefit calculator. Detailed Benefit Calculator. Medicare health insurance becomes available to you 24 months after the date you were first eligible to receive payments from SSDI.
When you receive a favorable decision, you will likely get a large check for back benefits! Single people with total incomes over $34,000 and married people with total incomes over $44,000 pay tax on a higher percentage of their Social Security disability benefits. This chart, based on a single person with $15,139 in Annual Social Security Benefits, shows how the rate of income tax increases as the amount of the person’s other income increases:
Source: the Congressional Research Services
“The calculation of taxable Social Security benefits depends on the level of benefits, the tax filing status, and non-Social Security income. Holding non-Social Security income constant, as benefits increase, taxable Social Security benefits will increase. For the same levels of non-Social Security income and Social Security benefits, a married couple will have lower taxable Social Security benefits than a single retiree.” So, the chart does not show other levels of benefits, or the impact of taxation on a married couple filing a joint tax return.
If you fall into the group of people who may be taxed on social security disability benefits because you received a large past-due benefits check, it may be possible to save income taxes. The IRS has set up a way to recalculate your back benefits and consider them received in the year you should have gotten them, rather than in the current year. Read more in IRS Publication 915. The benefits paid by Social Security are funded from taxes collected by the Internal Revenue Service. During your working years, you pay to the IRS a 6.2% Social Security tax and a 1.45% Medicare tax. Added to that is a matching 6.2% employer excise tax (or self-employment tax if you are self employed). Retroactive benefits can be paid for SSDI for up to 12 months before your SSDI application was filed. Retroactive benefits for SSI can only go back to the date of your application. Disability Benefits Booklet.
Government Pension Offset The Government Pension Offset (GPO) is a rather harsh attempt to equalize Social Security survivors benefits paid to a surviving (or dependent) spouse who also receives a government pension. In summary, the Social Security survivors or dependents benefit amount is offset by an amount equal to two-thirds of the amount of the pension. If you receive a pension from a federal government agency, Massachusetts state agency, Connecticut state agency, or another state or local government, based on work where you did not pay Social Security taxes, your Social Security spouse’s or widow’s or widower’s benefits may be reduced. Social Security has an electronic fact sheet about the reduction. You can see how Social Security handles the GPO by reading the POMS Chapters on the GPO.
Windfall Elimination Provision. Your own benefits can also be reduced by the Windfall Elimination Provision. If you work for an employer who does not withhold Social Security taxes from your salary, such as a government agency or an employer in another country, the pension you get based on that work may reduce your Social Security benefits. The “windfall elimination provision” affects how the amount of your retirement or disability benefits is calculated if you receive a pension from work where Social Security taxes were not taken out of your pay. A modified formula is used to calculate your benefit amount, resulting in a lower Social Security benefit.
Divorced Spouse Benefits Social Security regulations provide for benefits to Divorced Spouses. You are entitled to benefits as the wife or husband of an insured person who is entitled to old-age or disability benefits if— (a) You are the insured’s wife or husband based upon a relationship described in §§404.345 through 404.346 and one of the following conditions is met:
- Your relationship to the insured as a wife or husband has lasted at least 1 year. (You will be considered to meet the 1-year duration requirement throughout the month in which the first anniversary of the marriage occurs.)
- You and the insured are the natural parents of a child; or
- In the month before you married the insured you were entitled to, or if you had applied and been old enough you could have been entitled to, any of these benefits or payments: Wife’s, husband’s, widow’s, widower’s, or parent’s benefits; disabled child’s benefits; or annuity payments under the Railroad Retirement Act for widows, widowers, parents, or children 18 years old or older;
(b) You apply; (c) You are age 62 or older throughout a month and you meet all other conditions of entitlement, or you are the insured’s wife or husband and have in your care (as defined in §§404.348 through 404.349), throughout a month in which all other conditions of entitlement are met, a child who is entitled to child’s benefits on the insured’s earnings record and the child is either under age 16 or disabled; and (d) You are not entitled to an old-age or disability benefit based upon a primary insurance amount that is equal to or larger than the full wife’s or husband’s benefit. Survivors Benefits Booklet, SSA Publication No. 05-10084, also available in PDF also has a discussion.
Child’s Benefits Social Security child’s benefits booklets explain that “the family maximum payment is determined as part of every Social Security benefit computation, and can be from 150 to 180 percent of the parent’s full benefit amount.” For example, if your Primary Insurance Amount is $1,000 per month, your family maximum will be around $1,500 per month, leaving $500 to be distributed equally among your children and eligible spouse. More examples. When you apply for benefits for your child, you will need the child’s birth certificate and the parent’s and child’s Social Security numbers. Depending on the type of benefit involved, other documents may be required. For example, if you are applying for survivors benefits for the child, you will need to furnish proof of the parent’s death. If you are applying for benefits for a disabled child, you will need to furnish medical evidence to prove the disability. The Social Security representative who sees you will tell you what other documents you will need. SSI Supplemental Security Income (SSI), pays benefit amounts to elderly, blind and disabled people (including children under age 18) who have limited income and resources, and who do not have enough work credits to be eligible for SSDI. The SSI program is based on your:
- Income: Understanding Income Booklet
- Resources: Understanding Resources Booklet
- Your Living Arrangement: Why Your Living Arrangement is Important
Understanding SSI and the Federal Benefit Rate. Click here for: Monthly SSI Payment Amounts in Massachusetts; 2014 Figures For All States Some people are eligible for both SSDI and SSI payments. SSI eligibility in Massachusetts makes you eligible for health insurance from MassHealth. To be eligible for SSI, you cannot have more than $2,000 in countable assets. Options for people who have more than $2,000 in assets, but need SSI eligibility include
- Supplemental Needs Trusts: Ways You Can Use a Supplemental Needs Trust
- Pooled Trusts: Comparison of Pooled Trusts in Massachusetts; Ways You Can Use a Pooled Trust
I can help you determine whether you are eligible for either SSDI or SSI, or both programs, and help you coordinate the health insurance benefits you need for yourself and your family. SSI payments are made on the first day of the month. Social Security disability and retirement benefits are paid on a different schedule throughout the month.