If you’re self-employed, you probably love setting your own hours and rates. But it’s not always easy — and it can definitely feel like no one’s got your back when things go wrong. You certainly don’t get paid sick days, for example, and you’re likely purchasing your own health insurance on the exchange. You’re saving up for retirement without an employer-sponsored 401k, and you’re paying that extra self-insurance tax each year, to boot.
While self-employed individuals don’t have the same rainy-day benefits as salaried or hourly employees, you can qualify for disability benefits. To learn which benefits program you might be eligible for if you become too disabled to work, keep reading…
Understanding SSDI vs. SSI
When we talk about federal disability programs, all the acronyms people use can be deeply confusing — but stick with us. First, we’ll specifically talk about whether self-employed workers can qualify for Social Security disability insurance (SSDI) benefits. Then, we’ll talk about qualifying for Supplemental Security Income (SSI) benefits, which help only the lowest-income Americans. While many people say “disability benefits” instead of SSI or SSDI, they are two completely different federal disability programs. The reason people often mix up the two is because the SSA oversees and manages both federal disability assistance programs.
Here’s how to remember the difference: SSDI is, essentially, an early retirement benefits withdrawal approved by the Social Security Administration. You’re asking the SSA’s permission to access your money you’ve already paid into the Social Security fund through FICA taxes. SSI benefits, on the other hand, are what most people consider closer to the word “welfare.” While the SSA also administers these benefits, the payments don’t come out of the Social Security trust fund. Instead, SSI benefits come from the General Treasury fund, meaning they have zero impact on anyone’s future retirement payouts.
The qualifying criteria make up another major difference between Social Security disability (SSD or SSDI) and Supplemental Security Income (SSI). SSDI’s available to anyone with 40 Social Security work credits (20 within the last 10 years) — which includes self-employed people. SSI benefits only go to low-income individuals with little or no work history who would otherwise qualify for SSDI. Eligible SSI applicants must own less than $2,000 in available assets and earn less than $1,260 per month.
How Self-Employed Individuals Qualify for SSDI
People who work and pay into the Social Security fund through FICA tax withholdings every paycheck may qualify for SSDI. That includes self-employed workers who pay self-employment taxes to the federal government. First, know that SSDI is only available to people whose disabilities prevent them from working for at least 12 months. Second, you must receive medical treatment for your condition in order to qualify for SSDI.
The amount in SSDI benefits you may qualify for depends on how long you worked and your highest average paychecks. If you qualify for SSDI, your spouse and any eligible children can also apply to receive those benefits.
If you’re self-employed, pay FICA taxes on your own paychecks and have 40 work credits, you’ll potentially qualify for SSDI. In addition, you must earn 20 of those work credits within the last decade. That’s why we usually say “worked 5 out of the last 10 years full-time,” since that equals 20 work credits. Self-employed people earn Social Security work credits just like individuals working for outside employers do, provided you pay FICA taxes.
How the SSA Evaluates Self-Employed SSDI Applicants
The SSA considers your activities and their value to your business when measuring your substantial gainful activity while you’re self-employed. The SSA does not consider your income alone. That’s because how much you actually earn could include other income besides wages, such as capital investments and profit-sharing agreements.
The SSA applies certain tests to determine whether or not you’ve engaged in substantial gainful activity as a self-employed worker. These tests usually compare you with other local nondisabled employees working in the same job sector to determine your eligibility. Some things the SSA may review to assess your work activity’s eligibility may include:
- How many hours you usually work
- Your skillset (and proficiency level for each skill)
- Your energy output and efficiency
- Typical job duties and/or responsibilities
How Self-Employed Applicants May Qualify for Legal Assistance
If you’re considering applying for disability benefits as a self-employed worker, we suggest consulting an experienced Social Security attorney first. That’s because having a lawyer file your disability application makes you 2x more likely to get approved on your first try. What’s more, these attorneys always work on contingency and offer free, no-obligation claim consultations. This means you’ll pay a lawyer $0 for professional legal assistance if the SSA won’t award you benefits. And if you do win, then you’ll only pay a small, one-time fee.
Ready to see if you may qualify? Click the button below to start your free online benefits evaluation now!
Laura Schaefer is the author of The Teashop Girls, The Secret Ingredient, and Littler Women: A Modern Retelling. She is also an active co-author or ghostwriter of several nonfiction books on personal and business development. Laura currently lives in Windermere, Florida with her husband and daughter and works with clients all over the world. Visit her online at lauraschaeferwriter.com and linkedin.com.