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Social Security’s Work Incentives are ways to reduce your child’s earned income. They are like deductions you claim on your income taxes. This article will discuss the two most common SSI Work Incentives.
There are two primary advantages to using work incentives:
Although Social Security uses the term Work Incentives, they are income exclusions. They are used to exclude income. The lower your child’s countable income, the higher your child’s SSI monthly cash benefit.
SSI has four Work Incentives:
This chapter will explain the Student Earned Income Exclusion (SEIC) and the Impairment-Related-Work-Expense (IRWE) because they are the ones your child will most likely use.
Student Earned Income Exclusion (SEIC)
This Work Incentive allows your child to exclude earned income. Normally, according to the SSI calculation, for every $2 your child earns (after the $85 exclusion for Unearned and Earned Income), your child’s SSI payment will be reduced by $1. For example, if your child earns $185 in one month and has no unearned income, your child’s SSI monthly payment will be reduced by $50 ($100-$50=$50). However, if your child qualifies for the Student Earned Income Exclusion, it will exclude the earned income, and your child will receive the full SSI monthly payment.
In 2023, the Student Earned Income Exclusion permits students to exclude up to $2,220 per month but not more than $8,950 for the year if two criteria are met:
Social Security usually adjusts the monthly amount and the yearly limit annually, based on any increases in the cost–of–living index.
“Regularly attending school” means that the person takes one or more courses of study and attends classes:
Note: “Hours” refers to actual hours (60 minutes in an hour) and not course hours.
To receive the Student Earned Income Exclusion, the student must do the following:
Impairment-Related Work Expense (IRWE)
The next most common Work Incentive your child may use to exclude income is the Impairment-related Work Expense (IRWE). IRWEs are goods or services your child needs to buy to work.
Here’s the most critical distinction you need to know so your child can qualify for an IRWE to reduce your child's earned income: Whenever your child applies for an IRWE, your submitted documentation does not say your child needs the product or service. Instead, say your child’s impairment requires the product or service for your child to work. In other words, your child is asserting because of my disabling impairment, I have to pay for certain items so I can work. This distinction is the difference between having your child's IRWE approved or denied.
For example, let’s say your child has an anxiety disorder and takes medication to alleviate the symptoms. Your child wants to deduct the cost of the medication from their earned income. The documentation you provide Social Security must clarify that your child’s anxiety disorder requires the medication for your child to work. Remember, Social Security is focused on your child's capacity to work. Your child may need all sorts of goods and services, but Social Security only cares about those goods and services that your child's impairment requires for your child to work. In other words, you must connect the impairment to the need for the product or service to enable your child to work.
Generally, it’s okay if your child also needs the item or service for daily living. For example, in the example above, it’s understandable if your child also needs anxiety medication for work and daily living.
What’s the benefit of the IRWE? Although I will not bother with Social Security’s formal calculation, all you need to know is that for every $2 your child can claim as an IRWE, your child will receive an extra $1 in their SSI monthly cash benefit.
For your child to claim the IRWE, your child must also satisfy two additional criteria:
Social Security names ten IRWE categories:
However, be aware the above categories are broad. Just because an expense falls within a category does not mean your child can claim it as a deductible IRWE. For example, regularly prescribed medical treatment or therapy necessary to control your child’s disabling condition for your child to work may be an allowable IRWE. However, drugs or medical services for minor physical or mental health problems would not be an allowable IRWE, such as routine dental or optical services (unrelated to blindness), allergy treatments, or annual physical exams.
Here are some further examples from Social Security of potentially allowable IRWEs:
_____________________________________________________________________________
If you work, we may deduct your out-of-pocket expenses for items such as medicine, medical supplies, medical devices, service animals, assistive technology that people with disabilities use for employment-related purposes; such as software applications, computer support services, and special tools which have been specifically designed to accommodate the person’s impairment and disposable items such as bandages and syringes when figuring the amount of your earned income.
We may also be able to deduct your out-of-pocket expenses for medical services such as counseling, doctors visits and some attendant care services charged for preparing you for work, attending to you while you are at work, or getting you to and from work. We may also deduct certain out-of-pocket expenses for transportation and modifications to your home, car, or van to allow you to work.
The expense must not be reimbursed by any other source, and must be related to your disabling impairment(s) and needed in order for you to work.
______________________________________________________________________________
To recap: To claim an IRWE, your child must meet the following five requirements:
Social Security’s Work Incentives are ways to reduce your child’s earned income. They are like deductions you claim on your income taxes. This article will discuss the two most common SSI Work Incentives.
There are two primary advantages to using work incentives:
- Since SSI is a needs-based or means-tested benefit program, the more income you can exclude from your child’s earned income, the larger your child’s monthly SSI cash benefit; and
- Remember, Social Security's definition of disability is tied to how much your child can earn. People can apply these work incentives so their countable income remains low enough to protect their benefits from termination.
Although Social Security uses the term Work Incentives, they are income exclusions. They are used to exclude income. The lower your child’s countable income, the higher your child’s SSI monthly cash benefit.
SSI has four Work Incentives:
- Student Earned Income Exclusion (SEIE);
- Impairment-Related Work Expense (IRWE);
- Plan to Achieve Self-support (PASS);
- Blind Work Expense (BWE).
This chapter will explain the Student Earned Income Exclusion (SEIC) and the Impairment-Related-Work-Expense (IRWE) because they are the ones your child will most likely use.
Student Earned Income Exclusion (SEIC)
This Work Incentive allows your child to exclude earned income. Normally, according to the SSI calculation, for every $2 your child earns (after the $85 exclusion for Unearned and Earned Income), your child’s SSI payment will be reduced by $1. For example, if your child earns $185 in one month and has no unearned income, your child’s SSI monthly payment will be reduced by $50 ($100-$50=$50). However, if your child qualifies for the Student Earned Income Exclusion, it will exclude the earned income, and your child will receive the full SSI monthly payment.
In 2023, the Student Earned Income Exclusion permits students to exclude up to $2,220 per month but not more than $8,950 for the year if two criteria are met:
- The student is under the age of 22; and
- The student is regularly attending school.
Social Security usually adjusts the monthly amount and the yearly limit annually, based on any increases in the cost–of–living index.
“Regularly attending school” means that the person takes one or more courses of study and attends classes:
- In a college or university for at least 8 hours a week under a semester or quarter system; or
- In grades 7–12, for at least 12 hours a week; or
- In a training course to prepare for employment, for at least 12 hours a week (15 hours a week if the course involves shop practice); or
- In a home school situation (grades 7-12), for at least 12 hours per week and in accordance with the home school law of the State or jurisdiction in which the student resides; or
- For less time than indicated above if there are reasons beyond the student’s control, such as illness.
Note: “Hours” refers to actual hours (60 minutes in an hour) and not course hours.
To receive the Student Earned Income Exclusion, the student must do the following:
- Obtain a written statement from a school official stating the student is regularly attending school. The statement should also note how many hours the student attends each week;
- Apply for the exclusion every year by giving Social Security a letter requesting eligibility for the Student Earned Income Exclusion along with the statement from the school official stating that your child is regularly attending school;
- Report your child’s income to Social Security every month;
- Reapply every year;
- Ask Social Security to date stamp a copy of your paperwork. Keep the date-stamped paperwork in your files.
Impairment-Related Work Expense (IRWE)
The next most common Work Incentive your child may use to exclude income is the Impairment-related Work Expense (IRWE). IRWEs are goods or services your child needs to buy to work.
Here’s the most critical distinction you need to know so your child can qualify for an IRWE to reduce your child's earned income: Whenever your child applies for an IRWE, your submitted documentation does not say your child needs the product or service. Instead, say your child’s impairment requires the product or service for your child to work. In other words, your child is asserting because of my disabling impairment, I have to pay for certain items so I can work. This distinction is the difference between having your child's IRWE approved or denied.
For example, let’s say your child has an anxiety disorder and takes medication to alleviate the symptoms. Your child wants to deduct the cost of the medication from their earned income. The documentation you provide Social Security must clarify that your child’s anxiety disorder requires the medication for your child to work. Remember, Social Security is focused on your child's capacity to work. Your child may need all sorts of goods and services, but Social Security only cares about those goods and services that your child's impairment requires for your child to work. In other words, you must connect the impairment to the need for the product or service to enable your child to work.
Generally, it’s okay if your child also needs the item or service for daily living. For example, in the example above, it’s understandable if your child also needs anxiety medication for work and daily living.
What’s the benefit of the IRWE? Although I will not bother with Social Security’s formal calculation, all you need to know is that for every $2 your child can claim as an IRWE, your child will receive an extra $1 in their SSI monthly cash benefit.
For your child to claim the IRWE, your child must also satisfy two additional criteria:
- Your child has to pay for the product or service. For example, if insurance pays the medication cost, your child cannot claim the expense as an IRWE;
- Your child cannot claim expenses above your child's monthly earnings. For example, if your child earns $100 a month, your child cannot claim $500 in medication expenses — only $100.
Social Security names ten IRWE categories:
- Transportation Costs;
- Attendant Care Services;
- Service Animals;
- Medical Devices;
- Prosthesis;
- Residential Modifications;
- Prescription Drugs;
- Over-the-counter drugs & Medical Services;
- Diagnostic Procedures;
- Non-Medical Appliances & Devices;
- Other Items & Services.
However, be aware the above categories are broad. Just because an expense falls within a category does not mean your child can claim it as a deductible IRWE. For example, regularly prescribed medical treatment or therapy necessary to control your child’s disabling condition for your child to work may be an allowable IRWE. However, drugs or medical services for minor physical or mental health problems would not be an allowable IRWE, such as routine dental or optical services (unrelated to blindness), allergy treatments, or annual physical exams.
Here are some further examples from Social Security of potentially allowable IRWEs:
_____________________________________________________________________________
If you work, we may deduct your out-of-pocket expenses for items such as medicine, medical supplies, medical devices, service animals, assistive technology that people with disabilities use for employment-related purposes; such as software applications, computer support services, and special tools which have been specifically designed to accommodate the person’s impairment and disposable items such as bandages and syringes when figuring the amount of your earned income.
We may also be able to deduct your out-of-pocket expenses for medical services such as counseling, doctors visits and some attendant care services charged for preparing you for work, attending to you while you are at work, or getting you to and from work. We may also deduct certain out-of-pocket expenses for transportation and modifications to your home, car, or van to allow you to work.
The expense must not be reimbursed by any other source, and must be related to your disabling impairment(s) and needed in order for you to work.
______________________________________________________________________________
To recap: To claim an IRWE, your child must meet the following five requirements:
- The item(s) or service(s) enables your child to work;
- Your child needs the item(s) or service(s) because of physical or mental impairment;
- Your child pays for the item(s) or service(s) and is not reimbursed by another source such as Medicare, Medicaid, or a private insurance carrier;
- The cost is “reasonable.” That is, it represents the standard charge for the item or service in your community;
- Your child must have proof of payment.