Can You Get Earned Income Credit on Disability?
Learn how disability income affects Earned Income Credit eligibility, including key requirements, filing considerations, and necessary documentation.
The Earned Income Credit (EIC) is a tax benefit that helps low- to moderate-income workers by reducing tax liability and potentially providing a refund. Many individuals receiving disability benefits wonder if they qualify, as eligibility depends on income sources and filing requirements.
Earnings Requirements
To qualify for the EIC, you must have earned income, which includes wages, salaries, tips, and self-employment earnings. Disability benefits such as Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI) do not count as earned income. However, if you receive disability payments from an employer-sponsored plan while still considered employed, those payments may be treated as earned income.
Self-employment income qualifies if reported on a tax return, with net earnings of at least $400 triggering self-employment tax obligations. The IRS calculates net earnings by subtracting business expenses from gross income. If you run a business or work as an independent contractor while receiving disability benefits, only net profit counts toward EIC eligibility.
The IRS sets income limits for EIC eligibility, which vary by filing status and number of qualifying children. For 2024, the maximum adjusted gross income (AGI) to claim the credit ranges from $17,640 for single filers with no children to $63,398 for married couples with three or more children. If your total income exceeds these thresholds, you will not qualify.
Types of Disability Income
Different types of disability income affect EIC eligibility in different ways. Some payments are considered earned income, while others are not.
Social Security
SSDI and SSI provide financial assistance to individuals with disabilities. SSDI is based on prior work history, while SSI is a needs-based program. Neither counts as earned income for EIC purposes.
If you return to work while receiving SSDI, the Social Security Administration allows a nine-month trial work period during which wages count as earned income. If you receive a lump-sum SSDI payment covering multiple years, only the portion attributed to the current tax year is relevant for EIC calculations.
Employer-Sponsored Plans
Some employers offer short-term or long-term disability insurance. If the employer paid the premiums and did not include the cost in taxable wages, the benefits are taxable but not considered earned income. If you paid the premiums with after-tax dollars, the benefits are tax-free and do not count as earned income.
If you receive disability payments while still considered an employee, those payments may be treated as earned income. For example, if you are on short-term disability leave and continue receiving wages, those payments qualify for EIC. Once you are no longer considered employed, disability benefits from these plans are treated as unearned income and do not count toward EIC eligibility.
Veterans’ Benefits
VA disability compensation is tax-free and not considered earned income for EIC purposes. These payments are based on service-related conditions and are not tied to employment.
Some veterans receive military retirement pay in addition to disability benefits. If received as wages or self-employment income, military retirement pay is taxable and considered earned income. Veterans working while receiving VA disability benefits can count only their wages or self-employment earnings toward EIC eligibility. Certain VA programs, such as Vocational Rehabilitation and Employment (VR&E), provide stipends for education and job training, which are not considered earned income. However, wages earned while participating in the program may qualify.
Filing Status and Dependents
Your filing status affects EIC eligibility. Single filers can qualify, but head of household filers generally receive a larger credit due to higher income thresholds. Married couples must file jointly to claim the EIC; filing separately disqualifies both spouses.
Having dependents can increase the credit amount. A qualifying child must meet IRS criteria, including relationship, age, residency, and support requirements. A child must be under 19 at the end of the tax year (or under 24 if a full-time student) and live with the filer for more than half the year. Permanently disabled children qualify regardless of age.
If you care for a disabled adult, such as a parent or sibling, they may qualify as a dependent under IRS rules. Unlike qualifying children, an adult dependent does not increase the EIC amount but may allow the filer to claim other tax benefits. The dependent’s gross income must be below $4,700 for 2024, and the filer must provide more than half of their financial support.
Documentation Requirements
To claim the EIC while receiving disability-related income, maintaining proper documentation is necessary. The IRS requires proof of earned income, which may include W-2 forms, 1099-NEC forms for self-employment income, or pay stubs showing taxable disability payments. For employer-sponsored disability plans, a benefits statement from the insurer or employer can clarify whether payments qualify as earned income.
Taxpayers with dependents must provide records establishing relationship and residency, such as school records, medical statements, or official letters from government agencies. If the dependent is permanently disabled, medical documentation or a Social Security Administration determination verifying the disability’s permanence may be required.
If the IRS questions eligibility, they may issue a CP75 notice requesting additional verification. Responding promptly with supporting documents is necessary to avoid delays or denials.