The different requirements surrounding Social Security Disability Insurance (SSDI) can be quite complex to understand for an applicant who is just starting out. To make things even more difficult to understand, there are many applicants who work as freelancers. So, can freelancers claim SSDI benefits?
Yes, freelancers can claim SSDI benefits, but they will be considered “self-employed.” Self-employed disability applicants must go through other screening processes to determine whether they are eligible for SSDI benefits or not.
Read below to find out what these screening processes entail.
How Does the SSA Define Disability?
The Social Security Administration (SSA) has a “Blue Book” with a list of conditions that can immediately qualify you for benefits. If you don’t have a condition that qualifies you automatically, the Social Security Administration will consider the extent to which your disability keeps you from working and the length of time it is expected to last.
Let’s say, for the sake of this example, that your remote work consists of sitting at a computer at home and doing nothing but typing. The Social Security Administration has rules for freelancers to qualify for disability payments even if they are not required to leave their homes or use transportation such as cars or public transportation in order to reach their place of employment.
Or imagine you’re in a terrible accident and need a major knee reconstruction. The surgeon does a great job, but the doctor in charge of your care tells you that it will take at least a year before you can put your knee to work without pain.
You are able to get your work done while sitting on the couch, but require help in getting up and moving around. Given your prolonged rehabilitation time and inability to function independently, you should be eligible for disability payments.
The Social Security Administration may also find you disabled if you are unable to sit or stand for at least 12 months due to a pelvic injury or operation. Think about the impact that being unable to sit for long periods would have on your ability to do your job and provide for yourself.
The SSA also considers problems with fine motor abilities. You may be eligible for assistance if you have difficulty with simple activities like typing on a computer or using your hands to grasp objects.
Nevertheless, we cannot overstate the importance of medical documentation, even with the examples provided. Applying for disability benefits requires evidence of the severity and duration of your ailment.
The only foolproof way to ensure you’ve done all that is possible to increase the likelihood of your application being accepted is to consult your doctors and collect the necessary medical records to establish the limitations imposed by your condition.
Did the doctor who operated on your knee take detailed notes throughout your pre- and post-op appointments? Does your physical therapist keep track of your progress, even if your healing is taking longer than expected? Make sure to get a copy of those documents.
The Social Security Administration will examine all of your supporting documentation closely to determine the extent of your impairments.
How Long Do I Need to Work for to Qualify for SSDI?
“Work credits” are how Social Security calculates your total number of years of employment. Once you have accumulated a sufficient number of work credits, you become eligible for Social Security benefits, such as SSDI, survivor payments, and retirement benefits.
Generally, your age at the time you became disabled will determine the number of credits you need to earn to be eligible for Social Security Disability Insurance. But a person obtains who 40 credits in a period of ten years will have satisfied the work credit threshold necessary to get full benefits.
So, how exactly do you earn a work credit? It’s proportional to the amount of income on which you’ve paid Social Security taxes. The amount of income required to earn a work credit varies on a yearly basis. In 2023, you earn 1 Social Security and Medicare credit for every $1,640 in covered earnings each year. You must earn $6,560 to get the maximum 4 credits for the year.
The earnings may have come at any time of the year. For instance, if your self-employment earnings for the year total at least $6,560, you will be eligible for all four work credits.
In order to pass the recent work test, you need to have earned a particular amount of your work credits in the most recent years. This means that you have to have filed and paid self-employment taxes for at least five of the previous ten years. We’ll talk more about these tests in the coming sections.
Can I Claim SSDI as a Freelancer?
Yes, it is possible to claim SSDI as a freelancer. Freelancers are considered “self-employed” for Social Security purposes. If you are self-employed and want to collect Social Security disability payments, you must have earnings that are below what the SSA deems “substantial gainful activity” or SGA.
If a person is able to earn more than a certain amount (which is $1,470 per month in 2023), then they are not considered disabled.
If you’re self-employed, Social Security will look at your work a little bit differently to see if it constitutes substantial gainful activity (which would then exclude you from disability payments).
For self-employed individuals, including business owners, consultants, freelancers, and gig workers, Social Security employs a “three tests” system.
Test # 1: The Significant Services and Substantial Income Test
You are engaging in SGA if you perform major services for your company and earn a significant income from doing so. Your services may or may not be significant, depending on the type of business you run.
What Are Significant Services?
If you are the only person who owns or works at your company, then the services you provide are immediately seen as significant. If this is your present situation and your monthly business income is greater than $1,470, then you are considered engaged in SGA and are ineligible for disability benefits.
Social Security will also consider your contributions to the business to be substantial if you manage the company for 46 or more hours each month, regardless of whether you have workers or co-owners.
If you rent your land to another person, but still manage the farm or help produce the crops or cattle on the farm, your services will be regarded as substantial.
What is Substantial Income?
Social Security will deduct specific costs and expenses from the earnings of the business you run when determining your countable income. Before determining whether you have a sizable income, Social Security will deduct the following from your earnings:
- the assistance you’re receiving from others (like relatives) that you’re not being charged for
- free accommodation, appliances, or other resources (from a rehabilitation center, for example)
- costs associated with your disability that you pay in order to continue working, such as using a taxi to and from work
Your “countable income” is the amount that remains after deducting these expenses.
If you’re self-employed and bringing in more than $1,470 per month, that’s deemed “substantial” income. Even if your monthly income is less than $1,470, it is still possible for it to be considered substantial if the money you generate from your self-employment:
- is comparable to what you were making before your disability, or
- is comparable to the average income of local, non-disabled self-employed individuals operating in your field.
Since self-employed people typically see a fluctuation in their monthly earnings, Social Security will utilize the average of those wages for these purposes.
The Comparability Test
If you are not providing substantial services or earning a substantial income, Social Security will proceed to the next two tests.
The comparability test evaluates the work you do in relation to that of a non-disabled individual from your community whose line of work is comparable to yours. If Social Security decides that the work is comparable, then your job is considered SGA, regardless of how much you earn from it. Throughout this evaluation, Social Security considers:
- job responsibilities
- required skills
- productivity
- time worked
- energy spent on the job
This test does not evaluate the value of the work that was done; rather, it just compares the job activities.
Worth of Work Test
The worth of work test is a valuation of your contributions to a company. Work qualifies as SGA if the value of what you do can be demonstrated in the following ways:
- worth more than $1,470 monthly, or
- the cost of hiring a person to do the same work amounts to $1,470
The Countable Income Test
If you started your own business or started doing contract or freelance work more than 24 months after you first started receiving benefits from Social Security, the agency will employ the “Countable Income Test” to determine whether your activity qualifies as SGA.
As was covered in the section regarding the three tests, the first step in determining your Social Security benefit is to calculate your “countable income.” Regardless of the number of hours you put in at your job, if your monthly countable income is less than $1,470, you will not have your benefits reduced or eliminated.
Your benefits will be terminated if the amount of your countable income is greater than $1,470 per month, unless you show that you did not provide significant services to your business during that particular month.
The three tests above can help you figure out if the work you’re doing for your company is substantial or not.
The amount of money you make is irrelevant if you can prove that your services are not substantial and you can continue to receive benefits.
What Taxes Are Required for Disability Benefits?
In order to be qualified for Social Security benefits, you are required to pay the self-employment tax, which accounts for both Social Security and Medicare contributions. This means that self-employed individuals will use Schedule SE when completing their tax returns.
In 2023, the tax rate for those who are self-employed is 15.3 percent. 12.4% of this goes to Social Security, and the rest goes to Medicare. The IRS website contains a wealth of information about self-employment tax.
The self-employment tax is optional for some business owners. For instance, “S corporation” owners are exempt from paying self-employment tax on their business’s profits.
Therefore, if you own an S corporation, you won’t be able to claim Social Security disability payments unless you’ve also worked as an employee (either for your own company or for another) and paid Social Security taxes (FICA) on the money you earned.
How Much Will I Get in SSDI Benefits as a Freelancer?
The amount of disability benefits you receive is not based on the number of work credits you have earned but rather on the total amount of money you have made, whether it be through self-employment or a salary from a job.
When calculating your Social Security payment, Social Security utilizes your “average indexed monthly earnings” (AIME). The AIME you receive is based on a complex calculation that considers things like:
- the average wage that people earned in your indexing year,
- the average wage that people earned in your computation base years, and
- the exact monetary amount that you earned.
How to Apply for SSDI as a Freelancer
The Social Security Administration requires applicants to submit an application and supporting medical evidence to prove that they are disabled and hence unable to work to file an SSDI claim. You can apply for SSDI either online or by visiting your neighborhood Social Security Administration office.
In addition to all the medical records that you are able to provide to the Social Security Administration, you will normally be required to sign release papers to grant the SSA permission to request other documents that they require to evaluate your claim. Since you are self-employed, you must also provide previous years’ tax returns.
Conclusion
In conclusion, it is possible for you to claim SSDI benefits as a freelancer, but you must go through strict criteria in order to qualify. For more information on whether you qualify for SSDI as a freelancer, you can also contact a disability attorney or a SSA advocate.
