Social Security Disability Benefits refers to payments made to retired adults and disabled people and to their children, spouses, and survivors who all are qualified. 

Social Security is sometimes called Old Age, Survivors, and Disability Insurance (OASDI) known as a program in the U.S. It is a comprehensive federal benefits program that provides partial replacement income for retired adults, spouses who qualify, or individuals whose ex-spouse has died and people who are struggling with disabilities. The program also supports children of beneficiaries under some specific conditions. 

How Social Security Disability Benefits Work?

The Social Security Act became law in 1935 after several amendments that included social welfare and social insurance programs. The benefits are determined by eligibility criteria mentioned in the Social Security Administration (SSA) Blue Book

The funds are provided by the Self Employed Contributions Act (SECA) (for self-employed individuals) or payroll taxes under the Federal Insurance Contributions Act (FICA).

The Internal Revenue Service (IRS) is responsible for collecting the tax deposits and entrusting them to the Social Security Trust Fund. The fund is made up of 2 separate funds such as the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance Trust Fund.

How Do You Qualify For Social Security Benefits?

Individuals who are struggling with a disability will qualify for Social Security old age (or retirement) benefits if they pay the program during their working tenure. Full insurance will be completed in 40 quarters or credits from covered wages. It means that a worker can earn 4 credits in a year. (Get more information on how many work credits you require for SSDI

One credit is given for $1,640 in earnings in 2023 which is adjusted every year to keep with the inflation. 

The SSA is responsible for keeping track of earnings throughout an individual’s career. They index every year’s total earnings and use 35 highest-earning years that will help to determine your average indexed monthly earnings (AIME). 

The AIME is then used to calculate your primary insurance amount (PIA) which is the monthly amount that you can collect after reaching full retirement age.

If an individual wants to calculate your full retirement age or SSA’s estimate of your life expectancy for benefit calculations, you can calculate by using SSA’s retirement calculator.

It will give the actual projections of your retirement benefits which will be based on your work record and others. Retired adults who have SECA-taxed wages or non-FICA wages may need help as rules are complicated for these individuals. 

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Types of Social Security Disability Benefits

There are different types of Social Security disability benefits as discussed below:

Spousal Benefits

Spouses who have not earned credits, who have not worked, or do not have enough credits to be eligible for Social Security Disability Benefits may receive benefits starting from age 62. It will be entirely based on the spouse’s work record. 

The benefits may get reduced if an individual claims benefits before reaching full retirement age. The maximum spousal benefit anyone can receive is half their spouse’s benefit at their full retirement age. (Learn more about spousal social security benefits)

Survivor Benefits

When a spouse dies, the surviving spouse is required to file for survivor’s benefits when they have reached the age of 60. The benefits will be reduced if they file for benefits before reaching full retirement age. 

The spouse may switch to their benefits if they wish to begin receiving them at 62 and through 70 if that benefit is more than the survivor’s benefit. 

Social Security Disability Insurance (SSDI)

Social Security Disability Insurance (SSDI) refers to a social insurance program that provides workers benefits when they have enough work credits and have paid Social Security taxes. SSDI provides benefits to dependants and disabled workers. (Get detailed insights on Social Security Disability Insurance (SSDI) )

Supplemental Security Income (SSI)

SSI is a need-based program that provides benefits to adults and disabled individuals who have little or no income or resources. (Get more information on Supplemental Security Income (SSI))

Special Considerations

If an individual taxpayer’s income is more than $25,000, or a married couple wants to file jointly and has an income of more than $32,000, will be required to pay taxes on their Social Security benefits.

The portion of the benefits that will be subjected to taxation will depend on the income of that individual. However, no one will pay taxes that will be more than 85% of their Social Security Benefits. 

Disability benefits are tax-free in most cases. If your child is receiving these benefits as a survivor or dependent benefits it will not count as your taxable income. 

What Happens To Unused Social Security Benefits?

The unused Social Security Benefits will be kept in the Social Security trust funds. It is used to pay individuals who are currently getting payments. 

The amount contributed to Social Security will not be refunded. Furthermore, the contributions made by an individual who dies before collecting benefits will not be returned.   

Which States Tax Social Security Benefits?

The 12 states that currently tax Social Security benefits are:

  • Colorado
  • Connecticut
  • Kansas
  • Minnesota
  • Missouri
  • Montana
  • Nebraska
  • New Mexico
  • Rhode Island
  • Utah
  • Vermont
  • West Virginia

What Percentage of Social Security Benefits Does a Widow Receive?

The widows will receive up to 100% of the deceased spouse’s primary insurance amount (PIA). Widows of a divorced spouse who are married for at least 10 years may qualify to collect up to 100% of the former spouse’s PIA if they are not remarried.

When Does Social Security Benefits Recalculate?

The Social Security Administration (SSA) reviews the benefits every year for the previous year’s income level. Suppose, an individual latest year is one of the highest-earning years, their benefit will be recalculated which will reflect the increased benefit.

Which Types Of Income Reduce Your Social Security Benefits?

If an individual is younger than full retirement age, the types of income that may contribute to your yearly earnings limit will reduce the amount of benefit. 

The income may comprise work wages paid and self-employment earnings. The types of income that may not reduce your benefits will include annuities, capital gains, pensions, investment earnings, and other government benefits.

How Can An Attorney Help You With Your Social Security Benefits?

A Social Security Disability Lawyer will guide you in the preparation of your claim, filing of appeals, and management of evidence. (Learn more on What do disability lawyers do?)

They will represent you in the disability hearing and in making a strong legal strategy. Therefore, they can make a difference in applying and making the process of your Social Security Disability Benefits easier.