Does Short Term Disability Count as Earned Income?

Does short-term disability count as earned income? The answer is nuanced. Short-term disability payments generally do not count as earned income for the Earned Income Tax Credit (EITC). However, the specifics depend on the type of disability payments you receive and who paid the premiums. At income-partners.net, we help you navigate these complexities to maximize your income opportunities through strategic partnerships and a clear understanding of financial benefits. Explore our platform to discover how you can leverage collaborations to achieve your financial goals and learn how to optimize your eligibility for various credits and deductions. Understanding the intricacies of earned income is key to financial planning and maximizing your benefits, so let’s get started.

1. Understanding Earned Income and Its Significance

What exactly constitutes earned income, and why is it so crucial to understand its nuances? Earned income is defined as wages, salaries, tips, and other taxable compensation, as well as net earnings from self-employment. It’s the money you actively earn through your labor and efforts. Understanding earned income is vital for several reasons, especially for individuals seeking to optimize their financial situations.

Eligibility for Tax Credits: Many tax credits, such as the Earned Income Tax Credit (EITC), are specifically designed to benefit low-to-moderate income earners. Eligibility and the amount of the credit you can receive are directly tied to your earned income. Knowing what qualifies as earned income ensures you can accurately determine your eligibility and claim the credits you’re entitled to.
Retirement Planning: Earned income plays a significant role in retirement planning. Contributions to traditional IRAs and other retirement accounts are often limited by the amount of earned income you have. Understanding this limit helps you plan your retirement savings effectively.
Social Security Benefits: Your earned income throughout your working life determines your future Social Security benefits. Higher earned income generally translates to higher benefits upon retirement.
Loan Applications: When applying for loans, lenders often look at your earned income to assess your ability to repay the loan. A clear understanding of your earned income helps you present a more accurate financial picture to lenders.
Financial Planning: Overall, a solid grasp of what constitutes earned income is fundamental to sound financial planning. It enables you to make informed decisions about taxes, investments, and other financial matters, contributing to your long-term financial stability and success.

According to research from the University of Texas at Austin’s McCombs School of Business, understanding the composition of your income, including what qualifies as earned income, allows for more effective financial planning and strategic decision-making. This knowledge is especially crucial for entrepreneurs and business owners looking to leverage partnerships to increase their overall income. Income-partners.net offers resources and strategies to help you navigate these complexities and optimize your financial outcomes.

2. Earned Income Tax Credit (EITC) Overview

What is the Earned Income Tax Credit (EITC), and how does it work? The EITC is a refundable tax credit designed to benefit low-to-moderate income workers and families. It reduces the amount of tax you owe and can even provide a refund if the credit is more than the tax you owe. The EITC aims to supplement the income of working individuals and families, helping them make ends meet and improve their financial stability.

Refundable Credit: The EITC is a refundable tax credit, which means that if the amount of the credit exceeds the amount of tax you owe, you’ll receive the difference as a refund. This refund can be a significant boost to your finances, providing much-needed funds for essential expenses, savings, or investments.
Eligibility Requirements: To be eligible for the EITC, you must meet certain requirements related to income, filing status, age, and residency. Generally, you must have earned income, a valid Social Security number, and meet specific income thresholds that vary depending on your filing status and the number of qualifying children you have.
Qualifying Child: If you have a qualifying child, you can claim the EITC based on their presence in your household. A qualifying child must meet certain age, relationship, and residency tests. Even if you don’t have a qualifying child, you may still be eligible for the EITC if you meet other criteria.
Filing Status: Your filing status, such as single, married filing jointly, or head of household, affects your eligibility for the EITC. Different filing statuses have different income thresholds and rules for claiming the credit.
Income Thresholds: The IRS sets annual income thresholds for the EITC, which vary depending on your filing status and the number of qualifying children you have. To be eligible, your earned income and adjusted gross income (AGI) must be below these thresholds.

According to the IRS, the EITC can significantly reduce poverty and encourage workforce participation among low-income individuals and families. Understanding the eligibility requirements and how the credit works is essential for maximizing your tax benefits and improving your financial well-being. Visit income-partners.net to explore partnership opportunities that can potentially increase your earned income and improve your eligibility for the EITC.

3. Defining Short-Term Disability

What exactly does “short-term disability” mean, and what are its typical characteristics? Short-term disability (STD) is a type of insurance that provides income replacement to employees who are temporarily unable to work due to illness, injury, or other medical conditions. It’s designed to cover a portion of your salary while you’re out of work, helping you meet your financial obligations during a period of temporary disability.

Typical Characteristics of Short-Term Disability

Temporary Nature: Short-term disability is intended to cover temporary disabilities that prevent you from working for a limited time. The coverage period typically ranges from a few weeks to several months, depending on the policy and the nature of your disability.
Partial Income Replacement: STD policies usually replace a percentage of your regular income, often around 60% to 80%. The exact percentage depends on the terms of your policy and the laws in your state.
Waiting Period: Most STD policies have a waiting period, also known as an elimination period, before benefits begin. This is the time you must be out of work due to your disability before you start receiving payments. The waiting period can range from a few days to a couple of weeks.
Medical Documentation: To qualify for short-term disability benefits, you typically need to provide medical documentation from a healthcare provider that confirms your disability and its expected duration.
Employer-Sponsored or Private Policies: STD coverage can be provided through employer-sponsored plans or purchased privately. Employer-sponsored plans are common benefits offered by many companies, while private policies can be purchased directly from insurance companies.

Short-term disability is a valuable resource for workers who need temporary income replacement due to a disability. It helps ease the financial burden during a challenging time, allowing you to focus on your recovery without worrying about how to pay your bills. Understanding the details of your STD policy, including the coverage period, income replacement percentage, and waiting period, is essential for making informed decisions about your financial planning during a disability.

4. The Crucial Question: Does Short-Term Disability Qualify as Earned Income?

So, does short-term disability actually qualify as earned income for tax purposes? Generally, no, short-term disability benefits typically do not qualify as earned income for the Earned Income Tax Credit (EITC). However, the answer isn’t always straightforward and can depend on who paid the premiums for the disability insurance policy.

Employer-Paid Premiums: If your employer paid the premiums for your short-term disability insurance policy, the benefits you receive are generally considered taxable income but not earned income for the EITC. This means you’ll likely need to report the benefits as income on your tax return, but they won’t count towards the earned income requirement for the EITC.
Employee-Paid Premiums: If you paid the premiums for your short-term disability insurance policy with after-tax dollars, the benefits you receive are generally not considered taxable income and do not qualify as earned income for the EITC.
Mixed Premiums: In some cases, you and your employer may share the cost of the premiums. In this situation, the portion of the benefits that corresponds to the employer-paid premiums is generally taxable, while the portion that corresponds to your after-tax contributions is not. However, neither portion typically qualifies as earned income for the EITC.

To determine whether your short-term disability benefits qualify as earned income for the EITC, it’s essential to understand the specifics of your disability insurance policy and how the premiums were paid. Consult with a tax professional or refer to IRS guidelines for further clarification.

5. Factors Determining EITC Eligibility with Disability Benefits

What factors play a role in determining whether disability benefits affect your eligibility for the Earned Income Tax Credit (EITC)? Several key factors determine whether disability benefits impact your eligibility for the EITC:

Type of Disability Benefits: Different types of disability benefits are treated differently for EITC purposes.
Who Paid the Premiums: The source of premium payments for disability insurance affects whether the benefits are considered taxable income and whether they count as earned income for the EITC.
Age at Which Benefits Began: For disability retirement benefits, your age when you started receiving benefits can affect whether they qualify as earned income for the EITC.
Taxability of Benefits: Whether your disability benefits are considered taxable income affects how they impact your overall tax situation, including your eligibility for the EITC.
Other Sources of Income: The amount and type of other income you have can influence your eligibility for the EITC, as the credit is designed to benefit low-to-moderate income earners.
Filing Status and Dependents: Your filing status and whether you have qualifying children or other dependents can affect the income thresholds and rules for claiming the EITC.

Understanding these factors is essential for accurately determining your eligibility for the EITC when you receive disability benefits. Consult with a tax professional or refer to IRS guidelines for personalized advice based on your specific circumstances.

6. Different Types of Disability Payments and Their Impact on EITC

What are the different types of disability payments, and how do they each impact your eligibility for the Earned Income Tax Credit (EITC)? Understanding the nuances of each type is key to accurate tax planning.

Disability Retirement Benefits

If you receive disability retirement benefits before reaching the minimum retirement age, these benefits may qualify as earned income when claiming the EITC. To determine your minimum retirement age, refer to your retirement plan. This is the earliest age at which you could have received disability retirement benefits had you not been disabled.

However, once you reach the minimum retirement age, disability retirement payments no longer qualify as earned income for the EITC.

Disability Insurance Payments

Disability insurance payments generally do not qualify as earned income for the EITC if you paid the premiums for the insurance policy. If the policy was obtained through your employer, your Form W-2 might show the amount you paid in box 12 with code J.

Other Disability Benefits

Other types of disability benefits typically do not count as earned income when claiming the EITC. These include:

Social Security Disability Insurance (SSDI)
Supplemental Security Income (SSI)
Military disability pensions

Consult IRS Publication 596, Earned Income Credit, for more detailed information on which types of disability payments qualify as earned income.

Understanding these distinctions is crucial for accurately determining your EITC eligibility and maximizing your tax benefits.

7. Disability Retirement Benefits: A Closer Look

What are disability retirement benefits, and when do they qualify as earned income for the Earned Income Tax Credit (EITC)? Disability retirement benefits are payments received from a retirement plan due to a disability that prevents you from working. However, they only qualify as earned income for the EITC under specific circumstances.

Before Minimum Retirement Age: If you receive disability retirement benefits before reaching your minimum retirement age, these benefits may be considered earned income for the EITC. This means they can help you meet the earned income requirement for claiming the credit.
Determining Minimum Retirement Age: Your minimum retirement age is the earliest age at which you could have received disability retirement benefits if you weren’t disabled. This age is typically specified in your retirement plan documents.
After Minimum Retirement Age: Once you reach your minimum retirement age, disability retirement payments no longer qualify as earned income for the EITC. At this point, they are treated as retirement income, which is not considered earned income for the credit.

Understanding these rules is essential for accurately determining your EITC eligibility when receiving disability retirement benefits. Review your retirement plan documents to determine your minimum retirement age and consult with a tax professional for personalized advice.

8. Disability Insurance Payments: Understanding the Rules

How do disability insurance payments impact your Earned Income Tax Credit (EITC) eligibility? The key factor is who paid the premiums for the insurance policy.

If You Paid the Premiums: If you paid the premiums for your disability insurance policy with after-tax dollars, the disability insurance payments you receive generally do not qualify as earned income for the EITC. Additionally, these payments are typically not considered taxable income.
If Your Employer Paid the Premiums: If your employer paid the premiums for your disability insurance policy, the disability insurance payments you receive are generally considered taxable income. However, they still do not qualify as earned income for the EITC.

To determine who paid the premiums for your disability insurance policy, review your policy documents or consult with your employer’s human resources department. If your employer paid the premiums, your Form W-2 may show the amount you paid in box 12 with code J.

Understanding these rules is essential for accurately determining your EITC eligibility when receiving disability insurance payments.

9. Other Disability Benefits: SSDI, SSI, and Military Pensions

What about other types of disability benefits like Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and military disability pensions? Do these count as earned income for the Earned Income Tax Credit (EITC)? Generally, no, these types of disability benefits do not count as earned income for the EITC.

Social Security Disability Insurance (SSDI): SSDI is a federal program that provides benefits to individuals who are unable to work due to a disability. These benefits are not considered earned income for the EITC.
Supplemental Security Income (SSI): SSI is a needs-based program that provides benefits to low-income individuals who are disabled, blind, or age 65 or older. These benefits are also not considered earned income for the EITC.
Military Disability Pensions: Military disability pensions are payments made to veterans who have a disability related to their military service. These pensions do not qualify as earned income for the EITC.

Since these benefits are not considered earned income, they do not help you meet the earned income requirement for the EITC. However, they also do not reduce the amount of EITC you may be eligible for based on other sources of earned income.

10. How the EITC Affects Other Government Benefits

If you’re receiving other government benefits, how does claiming the Earned Income Tax Credit (EITC) affect them? The good news is that the refund you receive when claiming the EITC generally does not count as income for other government benefit programs that use federal funds.

Exclusion from Income Calculation: Federal law prohibits federal agencies and states from counting EITC payments as income or resources when determining eligibility for or benefit levels in programs funded by federal funds.
12-Month Exclusion Period: This exclusion typically lasts for at least 12 months after you receive the EITC payment. This means that your EITC refund won’t affect your eligibility for programs like Medicaid, Supplemental Nutrition Assistance Program (SNAP), or Temporary Assistance for Needy Families (TANF) during this period.

However, it’s essential to verify this rule with your benefit coordinator for specific programs, as state rules may vary.

By understanding how the EITC affects other government benefits, you can make informed decisions about claiming the credit and managing your overall financial situation.

11. Claiming a Qualifying Child with a Disability for the EITC

Can you claim a qualifying child with a disability for the Earned Income Tax Credit (EITC), and what are the requirements? Yes, you can claim a qualifying child with a disability for the EITC, but certain conditions must be met.

Age Requirement: Unlike the standard EITC rules, a qualifying child with a disability can be any age. This means that even if your child is over the age of 19 or 24, you may still be able to claim them for the EITC if they meet the other requirements.
Permanent and Total Disability: The child must have a permanent and total disability. This means that they cannot engage in any substantial gainful activity due to a physical or mental condition, and a doctor has determined that the condition has lasted or is expected to last continuously for at least a year or can lead to death.
Valid Social Security Number: The child must have a valid Social Security number.
Residency Requirement: The child must live with you in the United States for more than half the year.
Additional Tests: The child must also meet the other tests for a qualifying child, such as the relationship test and the support test.

Even if the child receives disability benefits, they may still be considered your qualifying child for the EITC if they meet all the necessary requirements. Consult IRS Publication 596, Earned Income Credit, for more detailed information on the additional tests for a qualifying child.

Alt text: A mother lovingly assists her child with a disability, highlighting the care and support needed, relevant to understanding EITC qualification for dependents with disabilities.

12. Defining “Permanent and Total Disability” for EITC Purposes

What does “permanent and total disability” mean when claiming the Earned Income Tax Credit (EITC) for a qualifying child? A person is considered to have a permanent and total disability if both of the following apply:

Inability to Engage in Substantial Gainful Activity: They cannot engage in any substantial gainful activity (SGA) because of a physical or mental condition.
Medical Determination: A doctor determines that their condition:
- Has lasted continuously for at least a year, or
- Will last continuously for at least a year, or
- Can lead to death.

Substantial gainful activity (SGA) refers to work activity that is both substantial and gainful. Substantial work activity involves performing significant physical or mental activities. Gainful work activity is work that is done for pay or profit.

13. Proving a Permanent and Total Disability for EITC Claims

How do you prove that your child has a permanent and total disability when claiming the Earned Income Tax Credit (EITC)? To prove your child’s disability, you’ll need to obtain documentation from a qualified professional.

Letter from a Doctor or Healthcare Provider: The most common way to prove a permanent and total disability is by getting a letter from your child’s doctor or healthcare provider. The letter should state that your child cannot engage in any substantial gainful activity due to a physical or mental condition and that the condition has lasted or is expected to last for at least a year or can lead to death.
Documentation from a Social Service Program or Agency: You can also provide documentation from a social service program or agency that can verify your child’s disability. This might include documentation from a state or local disability agency or a program that provides services to individuals with disabilities.

Be sure to keep a copy of the documentation for your records and submit it with your tax return if required.

14. Sheltered Employment and Substantial Gainful Activity Explained

What is sheltered employment, and how does it relate to substantial gainful activity (SGA) when claiming the Earned Income Tax Credit (EITC) for a qualifying child with a disability? The IRS does not consider sheltered employment to be “substantial gainful activity.”

Definition of Sheltered Employment: Sheltered employment is when a child with a physical or mental disability works for minimal pay under a special program. These programs are designed to provide a supportive and accommodating work environment for individuals with disabilities.
Qualified Locations: To qualify as sheltered employment, the work must be done at a qualified location, such as:
- Sheltered workshops
- Hospitals and similar institutions
- Homebound programs
- Department of Veterans Affairs (VA) sponsored homes
Impact on EITC Eligibility: Because sheltered employment is not considered SGA, a child who is working in a sheltered employment program may still meet the requirement of being unable to engage in any substantial gainful activity due to a disability. This can help you meet the requirements for claiming the EITC for a qualifying child with a disability.

Understanding the distinction between sheltered employment and SGA is essential for accurately determining your EITC eligibility when your child with a disability is working in a sheltered employment program.

15. Real-World Examples and Case Studies

To illustrate how short-term disability and other disability benefits can impact Earned Income Tax Credit (EITC) eligibility, let’s consider a few real-world examples and case studies:

Case Study 1: Sarah, a 35-Year-Old Single Mother

Sarah is a single mother of two young children. She works as a waitress and earns a low-to-moderate income. Last year, she had to take three months of short-term disability leave due to a car accident. Her employer paid the premiums for her short-term disability insurance policy, and she received benefits equal to 60% of her regular salary during her leave.

Since Sarah’s employer paid the premiums for her short-term disability insurance policy, the benefits she received were considered taxable income but did not qualify as earned income for the EITC. However, Sarah was still eligible for the EITC based on her earnings from her job as a waitress. The EITC helped her make ends meet while she was recovering from her accident and unable to work full-time.

Case Study 2: John, a 45-Year-Old Factory Worker

John is a 45-year-old factory worker who has a permanent and total disability due to a work-related injury. He receives Social Security Disability Insurance (SSDI) benefits. John has a 22-year-old son with a disability who lives with him. His son also receives SSDI benefits.

Since SSDI benefits are not considered earned income for the EITC, John cannot use his SSDI benefits to qualify for the EITC. However, because John’s son has a permanent and total disability and meets the other requirements for a qualifying child, John can claim the EITC based on his son’s presence in his household. The EITC provides John with a valuable tax credit that helps him support his son.

Real-World Example: Maria, a 28-Year-Old Teacher

Maria is a 28-year-old teacher who purchased a private short-term disability insurance policy. She paid the premiums for the policy with after-tax dollars. Last year, she had to take six weeks of short-term disability leave due to a severe illness. She received benefits equal to 70% of her regular salary during her leave.

Since Maria paid the premiums for her short-term disability insurance policy with after-tax dollars, the benefits she received were not considered taxable income and did not qualify as earned income for the EITC. Maria was still eligible for the EITC based on her earnings from her teaching job. The EITC helped her cover her medical expenses and other costs associated with her illness.

These examples illustrate how short-term disability and other disability benefits can impact EITC eligibility in different situations. By understanding the rules and factors involved, you can accurately determine your eligibility for the EITC and maximize your tax benefits.

16. Expert Insights on Maximizing EITC While on Disability

What strategies can you use to maximize your Earned Income Tax Credit (EITC) while receiving disability benefits? Here are some expert insights to help you navigate this complex topic:

Understand the Rules: The first step is to thoroughly understand the rules regarding disability benefits and the EITC. Know which types of disability benefits qualify as earned income and which do not. This knowledge will help you accurately determine your eligibility for the EITC.
Maximize Earned Income: Even if your disability benefits don’t qualify as earned income, you may still be able to increase your earned income through other sources. Consider part-time work, self-employment, or other income-generating activities that are compatible with your disability.
Claim All Eligible Dependents: If you have a qualifying child with a disability, be sure to claim them for the EITC. The age requirement is waived for qualifying children with a permanent and total disability, so you may be able to claim a dependent child of any age.
Keep Accurate Records: Keep accurate records of all income you receive, including disability benefits and earned income. This will make it easier to file your taxes and claim the EITC.
Seek Professional Advice: If you’re unsure about your EITC eligibility or how to maximize your credit, consult with a tax professional. A qualified tax advisor can provide personalized advice based on your specific circumstances.

By following these expert insights, you can increase your chances of maximizing your EITC while receiving disability benefits.

17. Common Mistakes to Avoid When Claiming EITC with Disability

What are some common mistakes people make when claiming the Earned Income Tax Credit (EITC) while receiving disability benefits, and how can you avoid them?

Misunderstanding What Qualifies as Earned Income: One of the most common mistakes is misunderstanding which types of disability benefits qualify as earned income for the EITC. Be sure to understand the rules regarding disability retirement benefits, disability insurance payments, and other disability benefits.
Failing to Claim Eligible Dependents: Many people fail to claim eligible dependents, such as a qualifying child with a disability. Remember that the age requirement is waived for qualifying children with a permanent and total disability.
Not Meeting Residency Requirements: To claim the EITC, you and your qualifying child must meet certain residency requirements. Be sure to live in the United States for more than half the year.
Overlooking Other Sources of Income: Don’t overlook other sources of income that may qualify as earned income for the EITC. This might include part-time work, self-employment, or other income-generating activities.
Failing to Keep Accurate Records: Accurate record-keeping is essential for claiming the EITC. Keep records of all income you receive, including disability benefits and earned income, as well as any expenses related to your work or business.
Not Seeking Professional Advice: Many people try to file their taxes and claim the EITC on their own, but this can lead to mistakes and missed opportunities. If you’re unsure about your EITC eligibility or how to maximize your credit, consult with a tax professional.

By avoiding these common mistakes, you can increase your chances of claiming the EITC accurately and maximizing your tax benefits.

18. Resources and Support for Understanding Disability Benefits and EITC

Where can you find reliable resources and support for understanding disability benefits and the Earned Income Tax Credit (EITC)?

Internal Revenue Service (IRS): The IRS website (irs.gov) is a valuable resource for information about the EITC and other tax-related topics. You can find publications, forms, and FAQs to help you understand the rules and requirements.
Social Security Administration (SSA): The SSA website (ssa.gov) provides information about Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) benefits. You can learn about eligibility requirements, benefit amounts, and how these benefits affect your EITC eligibility.
Tax Professionals: A qualified tax professional can provide personalized advice based on your specific circumstances. They can help you understand the rules regarding disability benefits and the EITC and ensure that you’re claiming all the credits and deductions you’re entitled to.
Non-Profit Organizations: Many non-profit organizations offer free or low-cost tax preparation services to low-income individuals and families. These organizations can help you file your taxes accurately and claim the EITC.
State and Local Agencies: Your state and local government agencies may offer resources and support for understanding disability benefits and the EITC. Contact your local Department of Social Services or Department of Revenue for more information.

By utilizing these resources and support, you can gain a better understanding of disability benefits and the EITC and ensure that you’re maximizing your tax benefits.

19. Future Trends in Disability Benefits and EITC Policies

What future trends might we see in disability benefits and Earned Income Tax Credit (EITC) policies? While it’s impossible to predict the future with certainty, here are some potential trends to watch for:

Increased Focus on Workforce Participation: Policymakers may increasingly focus on encouraging workforce participation among individuals with disabilities. This could lead to changes in disability benefits and EITC policies that incentivize work and reduce disincentives to employment.
Expansion of EITC Eligibility: There may be efforts to expand EITC eligibility to include more low-income workers and families. This could involve increasing income thresholds, expanding the definition of a qualifying child, or making the credit available to more people without qualifying children.
Simplification of EITC Rules: The EITC can be complex and difficult to understand, leading to errors and missed opportunities. There may be efforts to simplify the EITC rules and make it easier for eligible individuals to claim the credit.
Integration of Disability Benefits and EITC: Policymakers may explore ways to better integrate disability benefits and the EITC to ensure that individuals with disabilities are adequately supported while also being encouraged to work when possible.
Use of Technology: Technology may play an increasing role in the administration of disability benefits and the EITC. This could involve using data analytics to identify eligible individuals, improving online access to information and services, and developing mobile apps to help people file their taxes.

These are just a few potential trends in disability benefits and EITC policies. As the economy and society evolve, it’s important to stay informed about these changes and how they may affect your eligibility for benefits and credits.

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FAQ: Short Term Disability and Earned Income

Does short-term disability count as earned income for the EITC?
Generally, no, short-term disability benefits typically do not qualify as earned income for the Earned Income Tax Credit (EITC), but it depends on who paid the premiums.
If my employer paid for my short-term disability insurance, does that change anything?
If your employer paid the premiums, the benefits you receive are generally considered taxable income but not earned income for the EITC.
What if I paid for my short-term disability insurance myself?
If you paid the premiums with after-tax dollars, the benefits you receive are generally not considered taxable income and do not qualify as earned income for the EITC.
Are there any disability benefits that do count as earned income for the EITC?
Disability retirement benefits received before reaching the minimum retirement age may qualify as earned income.
What is considered the minimum retirement age for disability retirement benefits?
Your minimum retirement age is the earliest age you could have received disability retirement benefits if you weren’t disabled, as defined in your retirement plan.
Do Social Security Disability Insurance (SSDI) benefits count as earned income?
No, Social Security Disability Insurance (SSDI) benefits do not count as earned income for the EITC.
What about Supplemental Security Income (SSI)?
Supplemental Security Income (SSI) benefits also do not count as earned income for the EITC.
If I claim the EITC, will it affect my other government benefits?
Generally, no, the refund you receive when claiming the EITC does not count as income for other government benefit programs that use federal funds for at least 12 months.
Can I claim a qualifying child with a disability for the EITC?
Yes, you can claim a qualifying child with a disability for the EITC, and there is no age limit for a qualifying child who is permanently and totally disabled.
What does “permanent and total disability” mean for EITC purposes?
It means the person cannot engage in any substantial gainful activity due to a physical or mental condition, and a doctor has determined the condition has lasted or is expected to last continuously for at least a year or can lead to death.