If you've paid self-employment taxes (SECA taxes) for many years, you'll be eligible for Social Security disability insurance (SSDI), just as if you worked for an employer who paid FICA taxes on your behalf. Self-employment includes freelance work, contract work, or any other work you do for a business you own.
But if you still own a business or do some type of work, Social Security won't grant you disability benefits if it considers you to be doing "substantial gainful activity" (SGA). For wage earners, Social Security uses an earnings cutoff amount, which is $1,550 in 2024, to determine whether you're doing SGA. (Read our article on SGA for wage earners for more information.)
For the self-employed, Social Security knows that income isn't necessarily a good measure of how much you are working. Instead, if you're self-employed, Social Security will assess whether your work is substantial gainful activity by using either the "Countable Income Test" or the "Three Tests." Which test Social Security uses depends on whether your initial application is being evaluated or Social Security is reviewing your work activity after you've been receiving benefits.
If you're just applying for disability benefits, or if you've been on SSDI disability for less than 24 months, Social Security will use one of the following three tests to evaluate whether your self-employment work is substantial gainful activity.
The first test Social Security will use is the "Significant Services and Income" test (see below). If this test doesn't show that your self-employment is SGA, Social Security will then use the "Comparability" and "Worth of Work" tests. If Social Security finds your self-employment is SGA, you'll be denied disability benefits, or your benefits will be terminated.
If you provide significant services to your business and you earn substantial income from it, you're engaging in SGA. Whether or not your services are significant depends on what kind of business you have.
If you're the sole owner or worker in your business, your services are automatically considered significant. If this is your situation and your income from the business is more than $1,550 per month, you're doing SGA and you won't be considered for disability benefits.
If you have employees or co-owners, Social Security will find that your services are significant if you either contribute more than half of the total time needed to manage the business each month or you manage the company for 46 hours or more a month.
If you rent your land to someone else, but you manage or help produce the farm's crops or livestock, your services will be considered significant if your participation is "material."
In considering the income you make under the Significant Services and Income test, Social Security will subtract some items from your business revenue. Social Security will subtract the value of the following items from your income before considering whether you're making substantial income:
The result after subtracting these costs is called your countable income.
Income from self-employment is considered "substantial" if your average income is more than $1,550 a month. But even if your income is less than $1,550 a month, it can still be considered substantial if the income you earn from your self-employment:
Social Security will use your average income in these tests, because earnings from self-employment generally change from month to month.
If you're not doing significant services or making substantial income under the first of the three tests, Social Security will perform the next two tests.
The comparability test compares the work you do with that of an unimpaired person in your community whose business is similar to yours. If Social Security determines that the work is comparable, then your work is SGA, regardless of your earnings. Social Security looks at the following factors for this test:
This test only compares work activity and not the value of the work performed.
The worth of work test measures the value of what you do for your business. Your work is SGA if the value of what you do is clearly:
If you start your own business or begin to do contract or freelance work more than 24 months after you begin receiving benefits, Social Security will use the "Countable Income Test" to see if your work is SGA.
First, Social Security comes up with your countable income, as discussed above in the Three Tests section. If your countable income is less than $1,550 a month, your benefits will not be terminated, no matter how much you are working.
If your countable income is more than $1,550 per month, your benefits will stop unless you can prove that you didn't provide significant services to your business during that month. Whether you're doing significant services for your business is determined as discussed above in the Three Tests section.
If you can show that your services aren't significant, your benefits won't be terminated under the Countable Income test, no matter how much money you make. Social Security can't compare your work to what you used to do or to what business people in your community do. Nor can the agency judge what your work is actually worth (as in the comparability test or the worth of work test).
Working for yourself at the SGA level won't terminate your disability benefits right away. You have nine months in which you can make over $1,110 (in 2024), or even over the SGA amount, and not have your Social Security disability benefits reduced at all.
Of course, you must let Social Security know whether you are no longer disabled during this time—if you're no longer disabled, your benefits will be terminated. For more information, see Nolo's article on the trial work period for disability recipients.
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