Self-employment offers flexibility that can work well for people with disabilities. But the rules for how it affects your benefits are different from regular employment. Here's what you need to know.
In this article, we'll cover:
- Self-employment rules for SSDI
- Self-employment rules for SSI
- How income is counted
- PASS plans for starting a business
1. Self-Employment Rules for SSDI
Different from wages:
- Self-employment evaluated differently
- Not just about earnings
- Activity level matters
- Three tests may apply
The three tests:
- Significant services test: Do you provide significant services?
- Comparability test: Are earnings comparable to similar workers?
- Worth of work test: Is your work worth the SGA amount?
Significant services:
- Managing the business
- Working 45+ hours/month
- Sole proprietor handling all operations
- Key to business success
Comparability:
- Would non-disabled person earn similar?
- In same business
- With similar work
- Compares your situation
Worth of work:
- What would your work be worth?
- If paid as employee
- For same tasks
- Market value assessment
Net earnings:
- Self-employment uses net, not gross
- Income minus business expenses
- More deductions available
- Can reduce countable income
Important: Self-employment on SSDI is evaluated on activity, not just income. You can earn under SGA and still be found to be performing SGA based on work activity.
2. Self-Employment Rules for SSI
Net self-employment income:
- Gross income minus business expenses
- This is countable income
- Affects SSI payment
- Different from SSDI evaluation
Earned income rules apply:
- $65 exclusion (plus $20 if unused)
- Then 1-for-2 reduction
- After business expenses
- Still better to work
Example:
- Gross business income: $1,200/month
- Business expenses: $400/month
- Net self-employment: $800/month
- After $65: $735
- SSI reduced by $367.50 ($735/2)
Resource considerations:
- Business assets may or may not count
- Tools of the trade often excluded
- Essential to self-support rules
- Evaluate carefully
3. How Income Is Counted
Business expenses (both programs):
- Cost of goods sold
- Supplies and materials
- Business-related travel
- Equipment depreciation
- Rent for business space
- Utilities for business
- Advertising
- Professional fees
What's NOT a business expense:
- Personal expenses
- Non-business use of vehicle
- Home expenses (unless home office)
- Personal meals
- Personal travel
Keeping records:
- Separate business and personal
- Track all income
- Document all expenses
- Keep receipts
- Essential for both programs
Reporting:
- Report business income to SSA
- Provide expense documentation
- Annual tax returns help
- Schedule C or Schedule SE
4. PASS Plans for Starting a Business
What PASS can do:
- Help you start a business
- Set aside money for business
- That money doesn't count for SSI
- Fund your self-employment
Using PASS for business:
- Training costs
- Equipment purchases
- Initial inventory
- Marketing
- Licenses and fees
- Any business startup cost
How it works:
- Create detailed plan
- SSA approves plan
- Set aside income/resources
- Use for approved purposes
- Build your business
Example PASS:
- Goal: Start home-based graphic design business
- Need: Computer, software, training
- Cost: $8,000 total
- Set aside: $300/month from other income
- Duration: 27 months to accumulate funds
PASS benefits:
- Money set aside doesn't count for SSI
- Can save above $2,000 limit
- Invest in your future
- Potential path off benefits
Tips for Self-Employment
Start small:
- Test your idea
- Build gradually
- Understand the rules
- Track everything from day one
Get help:
- SCORE mentors (free)
- Small Business Development Centers
- Vocational rehabilitation
- Ticket to Work
Understand your limits:
- How much can you work?
- What accommodations needed?
- Realistic about capacity
- Build around your abilities
Plan for variable income:
- Self-employment fluctuates
- Plan for slow months
- Report actual income
- Benefits may vary monthly
How Purple Helps
Purple supports self-employed individuals:
- Track business income separately
- Monitor SSI resource limits
- Organize finances for reporting
- Clear transaction history
- Simple money management