Learn how Social Security Disability Insurance for self employed works and how Substantial Gainful Activity (SGA) can affect your disability benefits.
Social Security Disability Insurance for self-employed is different from those who work for an employer.
When working for someone else, that employer takes Social Security taxes out of your paycheck and sends it to the Internal Revenue Service (IRS).
However, the self-employed must report net earnings to Social Security and pay their taxes directly to the IRS.
Keep reading to understand how self-employed disability works.
Do Self Employed Get Social Security?
Yes, self-employed people are eligible for Social Security Disability Insurance (SSDI) benefits.
However, if self-employed or own a business and still working, Social Security will not grant disability benefits if determined you are engaging in “Substantial Gainful Activity.”
What is Substantial Gainful Activity?
Substantial Gainful Activity (SGA) is the monthly salary limit the Social Security Administration uses to qualify individuals for disability benefits. The SSA updates the amount annually.
For example, the monthly salary cutoff is $1,350 in 2022. If you earn more than $1,350 gross income per month, the SSA Social Security will determine you as engaging in SGA.
However, for the self-employed, Social Security knows income alone is not necessarily the best measure of how much you are working. Self-employment includes freelance work, contract work, or any other work you do for a business you own or co-own.
If you are self-employed and starting your disability application, Social Security will evaluate whether your work is substantial gainful activity (SGA) using the “Three Tests.”
Three Tests for Social Security Disability Gainful Employment
If you apply for Social Security Disability Income (SSDI) or SSI or are on SSDI disability for less than 24 months, Social Security will use one of the following “three tests” to evaluate if your self-employment work is substantial gainful activity.
- The first Social Security test is “Significant Services and Substantial Income.”
- The second Social Security test is “Comparability of Work.”
- The third Social Security test is the “Worth of Work.”
If Social Security finds your self-employment is SGA, you will be denied disability benefits.
Note: After the SSA approves you for SSI, you can earn over the substantial gainful activity limit without having your benefits terminated. The test used for ongoing SSI recipients is the SSI income test.
1. The Significant Services and Substantial Income Test
If you provide significant services to your business and earn substantial income, you are engaging in SGA. Whether or not your services are substantial depends on what kind of business you have.
Significant Services Explained
Social Security will consider your services significant if you are your business’s sole owner or worker. For example, if your income from the business is more than $1,350 per month, you are engaged in SGA. As a result, the SSA will deny your disability benefits.
When you have employees or co-owners, Social Security will conclude your services are significant if:
- You contribute more than half the total time needed to manage the business each month.
- You manage the company for 46 hours or more a month.
Substantial Income Explained
Social Security will subtract items from your business revenue when considering your income from self-employment or ownership of a business.
For example, if you get unpaid help, Social Security will subtract the value of these items from your income before considering whether it’s substantial. The result is called your countable income.
Unpaid help includes:
- Help from family members, friends, etc.
- Free rent, equipment, or other items like vocational rehab, charitable organizations, etc.
- Paying disability-related expenses so you can work. For example, a special chair, desk, walker, driver, etc.
Income from self-employment is also considered “substantial” if your average income is more than $1,350 a month. Even if your income is less than $1,350 a month, it can still be substantial if the earnings are:
- Similar to what you earned before your disability began.
- Similar to what a non-disabled person in your community makes when self-employed in the same business as you.
Social Security will use your average income in these tests because self-employment earnings generally change monthly.
2. The Comparability of Work Test
Social Security will evaluate you under the following two tests if you are not doing significant services or making substantial income.
The Comparability of Work test compares your work with an unimpaired person in your community whose business is similar to yours. If Social Security determines the work is comparable, then it is considered substantial gainful activity (SGA) regardless of your earnings.
Social Security looks at the following factors for the Comparability of Work test:
- Job duties
- Job skills used
- Work efficiency
- Time worked
- Energy spent working
The Comparability of Work Test only compares work activity and not the value of the work performed.
3. Worth of Work Test
The Worth of Work test measures the value of what you do for your business. Your work is considered substantial gainful activity if the value of what you do is:
- Worth more than $1,350 a month.
- Worth more than $1,350 a month compared to what it would cost you to hire an employee to do your job.
Need Help with Self-Employed Social Security Benefits? Call Us!
Evans Disability has a team of experienced attorneys with vast knowledge of Social Security Disability benefits. They have helped hundreds of clients like you sort out Workers’ Compensation and Social Security Disability Income benefits issues.
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