How to Get Disability Benefits If Self-Employed

Self-employed people who have paid Social Security taxes for enough years are just as eligible for SSDI benefits as if they were employed by a company.

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Most people who pay Social Security taxes (qualifying them for disability benefits from the Social Security Administration) work for an employer and have their FICA taxes withheld from their paycheck. A fair amount of people also operate their own businesses or are otherwise self-employed. Self-employed people pay Social Security taxes (SECA) on a quarterly or annual basis when they file their estimated taxes or income tax returns. Regardless of how Social Security taxes are paid, self-employed people are just as eligible for Social Security disability insurance (SSDI) benefits as if they were employed by a company.

How the Self-Employed Earn Social Security Credits

Just like employees, self-employed people earn one credit for each quarter in which they earn a certain minimum amount of money. In 2022, you can earn one credit toward qualifying for Social Security benefits (disability, retirement, or survivor) if you make at least $1,510. If your net self-employment earnings are $6,040 or more in a year (regardless of when the earnings were made, since you are self-employed), you earn the yearly maximum of four credits—one credit for each $1,510 of earnings during the year.

How many credits you need to qualify for SSDI depends on how old you are when you become disabled. No one needs more than 10 years of work, or 40 credits, in order to qualify for the maximum amount of benefits, and if you are young when you become disabled, you could need as few as six credits.

Note that as a self-employed business owner, you'll report your net business profits (your gross earnings minus allowable business expenses) to the IRS rather than your gross earnings.

Paying the Self-Employment Tax

The "self-employment tax," which self-employed business owners pay along with their income taxes, includes Social Security taxes and Medicare taxes. The self-employment tax rate for self-employment income earned in 2022 is 15.3% (12.4% for Social Security and 2.9% for Medicare). In 2022, the first $147,000 of self-employment income is subject to both Social Security and Medicare taxes; anything you make over that amount is subject only to the Medicare tax (2.9%).

Getting Disability Benefits as a Self-Employed Person

If, when you become disabled, you haven't earned enough credits as a self-employed person to qualify for SSDI, note that you can still apply for SSI (Supplemental Security Income). Eligibility for SSI isn't dependent on your earnings record. Earning sufficient numbers of credits is only necessary to qualify for SSDI benefits, which provide you with more disability income than the SSI program.

Whether you're applying for SSDI or SSI, the Social Security Administration (SSA) uses the same definition of disability and performs the same evaluation process to see if you're medically eligible for benefits. Before the SSA even looks at your medical impairments, it will look to see if you are engaged in "substantial gainful activity" (SGA)—that is, whether you're working and making a certain amount of money (if you are, the SSA will consider you "not disabled" and will deny your disability claim).

What Substantial Gainful Activity Means for the Self-Employed

You must be unable "to engage in substantial gainful activity" to be approved for SSDI or SSI disability benefits; in 2022, you can't make more than $1,350 per month and qualify for disability (unless you're legally blind, in which case you can make $2,260 per month).

If you're self-employed, however, Social Security recognizes that your net profit isn't necessarily a good indicator of whether you're doing substantial gainful activity. Instead, the SSA will apply what they call "The Three Tests" to determine if your work activity is SGA. Your work will be considered SGA if you perform work that:

  • provides significant services to the business and brings in $1,350 or more in average monthly income
  • is comparable to the work of nondisabled people in your community working in the same or similar businesses, or
  • is worth $1,350 per month in terms of its effect on the business or what it saves you from having to pay an employee to do the work.

In judging your income, the SSA will deduct any "unincurred business expenses" from your net earnings, which are expenses that you don't pay for—that is, contributions made by others. For example, if a friend volunteers for your business to help you out or if you receive equipment through a vocational training program, the value of these expenses is deducted from your net earnings to give the SSA a more accurate value of your work.

To learn more details about these tests, read our article on the three tests for self-employed people.

Starting a Disability Claim If You're Self-Employed

In order to file any type of disability claim through the SSA, you must fill out an application and provide medical documentation of your medical condition(s) that makes you unable to work. You can submit your application online (for SSDI), or you can visit your local SSA office and fill out an application there. In addition to any medical records that you can provide to the SSA, you typically must sign release forms to allow the SSA to request additional records that they need to review your claim. You'll also need to submit your past tax returns because you're self-employed. If you need help applying and gathering records, you can contact a disability lawyer or advocate for assistance.

Updated July 5, 2022

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