Can a Tax Refund Affect SSI Eligibility?

The Social Security Administration (SSA) provides needs-based benefits to seniors and people who are blind or disabled, through the Supplemental Security Income (SSI) program. To meet the program's financial requirements, you must have a low income and few assets.

Social Security reassesses your financial eligibility each month to ensure you still qualify for SSI benefits. If you exceed those limits, you could lose all or part of your SSI benefits for that month.

That means receiving a lump sum of cash might jeopardize your benefits. Fortunately, Social Security doesn't treat federal income tax refunds the same as other windfalls. Your federal tax refund isn't likely to affect your SSI eligibility, but your state tax refund might. Here's what you need to know about getting a tax refund when you're on SSI.

When Does a Tax Refund Count as Income for SSI?

The SSI income limit changes each year based on the cost of living. In 2024, it's $943 per month for individuals and $1,415 for couples.

But not everything you receive is considered "countable income." The first $65 per month of earnings and half of wages over that amount are exempt from the SSI income limit. Certain other exemptions and state supplements to SSI can affect the income limit as well.

Federal and state tax refunds, including advanced tax credits, aren't countable income for SSI purposes so they don't count toward the income limit. (20 C.F.R. § 416.1103(d).) So, the only thing you need to worry about is the "resource" (asset) limit, which affects state tax refunds immediately, but federal refunds only after 12 months.

SSI Resource Limit and Tax Refunds

Under SSI rules, you can't have "countable resources" worth more than $2,000 (for couples, the limit is $3,000) in any month and qualify for SSI. Social Security counts your resources for the month based on what you have as of the first moment of the first day of each month. For SSI eligibility purposes, resources include cash in the bank or personal property, except for exempt items, such as:

• your residence
• one vehicle
• most household goods
• burial plots, and
• life insurance policies with a cash value of up to $1,500.

Federal refunds. Federal tax refunds don't count towards the resource limit—but only for the first 12 months after the month you receive the money. That exemption includes advanced tax credits like:

• earned income tax credit (EITC)
• child tax credit (CTC), and
• premium tax credit for marketplace health insurance.

If you haven't spent your federal tax refund within 12 months and have more than the allowable amount of cash remaining, you could lose your SSI benefits.

State refunds. State tax refunds aren't exempt from the SSI resource limit. That doesn't mean getting a tax refund from your state will necessarily affect your SSI eligibility, but holding onto it can. Remember, if you have more than $2,000 ($3,000 for a couple) in countable resources at the beginning of the next month, you won't receive your SSI benefits for that month, or the following months, until your resources fall below the limit.

So if you receive a state tax refund that puts you over the asset limit, you'll need to spend it before the end of the month, or you'll be ineligible for SSI. You could prepay your rent for a month or two or spend the money on exempt assets like food staples or a computer.

Do SSI Recipients Have to File Taxes?

SSI benefits are tax-exempt, so if your only income is SSI, you aren't required to file a federal tax return. But if you have any other income, you might have to. Plus, there can be benefits to filing a tax return.

When You Have Income Besides SSI Benefits

Although SSI isn't taxable income, Social Security retirement benefits and Social Security disability insurance (SSDI) benefits are. So are your wages from a part-time job. If you have enough taxable income, you'll have to file taxes.

You're required to file a tax return for any year that your taxable income was above a certain threshold, which changes each year. For instance, you must file a 2023 federal tax return if you're single and your taxable income was $13,850 or more ($15,700 if you're 65 or older). The threshold is about double that for married couples and surviving spouses. But if you were self-employed and earned $400 or more, you must file a federal tax return.

You're also required to file a federal tax return if you have marketplace health insurance (Obamacare) and you received a premium tax credit (the monthly premium discount).

Benefits of Filing a Tax Return When You're on SSI

Even if you aren't required to file a federal tax return, there can be benefits to filing a return for those receiving SSI. For instance, if you worked part-time and had taxes withheld from your paycheck, you might get a tax refund.

Plus, there are refundable tax credits that you can get even if you're not required to pay any taxes. But you can only get them if you file a return. If you're on SSI and you have dependents, you might qualify for the following:

• the Earned Income Tax Credit (EITC), the refund amounts vary, but the average EITC in 2022 was $2,541
• the Child Tax Credit (CTC), which pays up to $1,600 per child (younger than 17), and
• the Child and Dependent Care Tax Credit (CDCTC), if you paid for dependent care services so that you or your spouse could work or look for work.

If you receive a small disability pension or other disability-related income from a former employer, you might also qualify for the Tax Credit for the Elderly and Disabled.

Because any money you receive by claiming one of these tax credits is considered a federal tax refund, it doesn't count as income for SSI purposes. And it only counts as a resource if you still have it after 12 months.

You can learn more about filing for these credits by reading our article about refundable tax credits for the disabled.

Can a Person on SSI Get a Tax Refund?

Yes, receiving SSI doesn't prevent you from getting a tax refund, though you're not likely to get a refund unless you qualify for one of the credits discussed above. Read more about tax refunds for disability recipients.

_{Updated April 25, 2024}