Can You Own Rental Property While on Social Security Disability?

Can You Own Rental Property While on Social Security Disability?

Posted by on Dec 18, 2021

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The United States created retirement insurance for its workers with the passage of the Social Security Act of 1935, but benefits for disabled individuals took several decades to be included in the program. Finally, in 1956 workers unable to continue with gainful employment became eligible for payments, and Congress added enhancements over the following years.

While the number of SSDI (Social Security Disability Insurance) recipients fluctuates, there are approximately eight million at present. Since the system is an earned benefit, like Social Security Retirement benefits, recipients must have paid into the system for a minimum number of calendar quarters in order to receive payments upon the commencement of their disability. However, there are exceptions for individuals who become disabled before reaching working age. In some cases, family members may also qualify for benefits.

SSI or SSDI?

SSDI (Social Security Disability Income) is for individuals with sufficient work history to qualify for benefits. Some disabled or older people do not qualify for SSDI. If they have limited income and resources, they may instead be eligible for SSI, which is Supplemental Security Income. The benefit amounts are typically lower because the recipient does not have the work history that would qualify them for a higher SSDI payment. However, these beneficiaries may receive faster access to Medicare coverage.

Owning Property

One crucial distinction between SSDI and SSI is the asset and income tests. Neither program allows beneficiaries to earn income through working since the eligibility assumption is that they cannot work due to their disability. However, since SSI is a need-based program, recipients may not have other income or assets. In contrast, SSDI participants have earned their payments through work credits, so unearned income is allowed. Thus, for example, a disabled individual receiving SSDI benefits can legally own personal and rental property and earn revenue through rent payments.

Keep in mind that rental income (or income from other investments) can result in the SSDI recipient paying taxes on some of the benefits they receive from the SSDI fund. Therefore, it's a good idea to consult a tax advisor. In addition, the rental owner in this scenario presumably does not actively work at managing the properties since the indicated recipient is receiving disability payments due to an inability to be employed.

What if I sell a Property?

Since asset ownership and unearned (passive or rental) income do not threaten a recipient's SSDI benefits, buying and selling property should not cause concern. SSDI eligibility is based on the disability (subject to periodic review) and the work history credits.

 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Not associated with or endorsed by the Social Security Administration or any other government agency.

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