Can you get the earned income credit on Social Security Disability? Yes, you could. It depends on whether and how you file taxes, as well as your combined household income.
Social Security Disability is technically taxable if you exceed the income threshold that the IRS has set to make Social Security benefits taxable. Therefore, it would be helpful to learn about the tax credits you can claim so you can reduce your liability. And even if your Social Security Disability is all you get, claiming credits may enable you to receive a refund that increases your income.
Read More: Do You Pay Taxes on Disability Payments?
When Are Social Security Benefits Taxable?
If you file taxes as a single taxpayer, the IRS can tax up to 50 percent of your Social Security benefits if you earn an income of $25,000 to $34,000. But if your income exceeds the $34,000 limit, up to 85 percent of your Social Security Disability benefits may be taxed.
On the other hand, if you file a joint tax return, up to 50 percent of your combined income is taxable if you both earn an income of $32,000 to $44,000. And if your household income exceeds the $44,000 threshold, up to 85 percent of it becomes taxable.
To report the taxable portion of your Social Security benefits, you need to account for the money on line 6b of Form 1040 or Form 1040-SR.
Tax Credits for People on Social Security Disability
Below are some of the tax credits for people on Social Security Disability.
1. Disability and Elderly Tax Credit
It helps to learn how to get disability tax credits because they can be significant.
If you are 65 or older or retired due to a permanent and total disability and received disability income for the current tax year, you qualify for a disability tax credit. However, your adjusted gross income or the total of your nontaxable Social Security benefits, disability income or pensions annuities must be under specified limits.
The AGI limits for the 2021 tax year range from $12,500 to $17,500, depending on your filing status. And the other totals range from $3,750 to $5,000, also depending on your filing status. If you meet the specified criteria, you qualify for tax credits ranging from $3,750 to $7,500.
So, when do you get disability tax credits? Well, you get them after filing taxes the right way. Therefore, you must file Schedule R in addition to Form 1040-SR.
Read More: Tax Credits: What Are They & How Do You Qualify?
2. Earned Income Tax Credit (EITC)
The earned income tax credit is usually available to those with earned incomes. If your Social Security Disability benefits are all you get, you are unlikely to qualify for this kind of credit. However, if you or your spouse earns additional income or gets taxable disability benefits, you may qualify for the EITC. Also, when you receive disability benefits before retirement age, they qualify as earned income.
Typically, the earned income tax credit is given to low- and moderate-income families who may claim their children or relatives as dependents. A qualifying child should have a Social Security number and have a permanent and total disability.
The EITC you claim depends on your AGI, the number of children you claim and your filing status. And your investment income should be $10,000 or less. The amount of credit ranges from $1,502 to $6,728 for the tax year 2021.
For example, if you claim one qualifying child and file a joint tax return, your AGI should not exceed $48,108 and you can claim up to $3,618 as EITC.
3. Child Tax Credit
You can also claim the child tax credit while on Social Security Disability. For the 2021 tax year, the credit is worth $3,600 for each qualifying child under six years, $3,000 for each child between six and 17 years old.
You can qualify for the full child tax credit if your AGI ranges from $75,000 to $150,000, depending on your filing status. Beyond that limit, your credit begins to phase out until it reaches zero. It is worth noting though, that couples earning $400,000 and single filers earning $200,000 may still receive some credit for their qualifying children.
Even if you received no income apart from your disability payments during the 2021 tax year, the child tax credit is refundable. Schedule 8812 will be instrumental in helping you figure out the credits due to you.
Read More: Child Tax Credit: What Is It & How to Qualify
4. Work Opportunity Tax Credit
To encourage employers to hire more people on disability, talk to them about the work opportunity tax credit. The credit is available to members of targeted groups that continue to face barriers to employment. And the disabled are among them.
The maximum tax credit is $2,400 per qualified employee that performs at least 400 hours of service for the employer making the claims.
- SSA.Gov: Income Taxes And Your Social Security Benefit
- IRS.Gov: Regular & Disability Benefits
- IRS.Gov: Publication 524 (2021), Credit for the Elderly or the Disabled
- IRS.Gov: About Schedule R (Form 1040), Credit for the Elderly or the Disabled
- IRS.Gov: Disability and the Earned Income Tax Credit (EITC)
- IRS.Gov: Earned Income and Earned Income Tax Credit (EITC) Tables
- IRS.Gov: IRS updates Filing Season 2021 Child Tax Credit frequently asked questions, information to help taxpayers prepare their 2021 returns
- IRS.Gov: Work Opportunity Tax Credit
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