Will SSI Recipients Get the Child Tax Credit?
Understand the connection between receiving SSI and qualifying for the Child Tax Credit, including earned income rules and how the credit can affect your benefits.
Individuals receiving Supplemental Security Income (SSI) can be eligible for the 2023 Child Tax Credit (CTC) if they meet requirements set by the Internal Revenue Service (IRS). Receiving SSI benefits does not automatically disqualify a person from this tax credit. The key is understanding how the credit’s rules, particularly those related to income, interact with SSI payments. This article explains the eligibility criteria, how SSI is treated for tax purposes, and the steps to claim the credit without affecting SSI benefits.
Child Tax Credit Eligibility for 2023
For the 2023 tax year, the Child Tax Credit is valued at a maximum of $2,000 for each qualifying child. A portion of this credit is refundable through the Additional Child Tax Credit (ACTC), meaning you could receive money back even if you do not owe any federal income tax. For 2023, the refundable portion is capped at $1,600 per child. This distinction is important for individuals with little to no tax liability, which is common for those whose primary income is from SSI.
To claim the credit, your child must meet seven tests:
- Age test: The child must be under 17 at the end of 2023.
- Relationship test: The child must be your son, daughter, stepchild, foster child, sibling, or a descendant of one of these, such as a grandchild.
- Support test: The child cannot have provided more than half of their own financial support during the year.
- Dependent test: You must claim the child as a dependent on your federal tax return.
- Citizenship test: The child must be a U.S. citizen, U.S. national, or U.S. resident alien.
- Residency test: The child must have lived with you for more than half of the year.
- Joint return test: The child cannot file a joint tax return for the year, unless it is only to claim a refund of taxes withheld.
How SSI Affects CTC Eligibility
The interaction between SSI benefits and the Child Tax Credit is a primary concern for many recipients. SSI benefits are not considered taxable income by the IRS, so they do not count toward the income thresholds that could reduce the credit. For 2023, the credit begins to phase out for individuals with a modified adjusted gross income over $200,000, or $400,000 for those married filing jointly.
While SSI does not count as income for phase-out purposes, it also does not count as earned income. To claim the refundable portion of the credit, the ACTC, a tax filer must have at least $2,500 in earned income from employment or self-employment.
This earned income requirement is a hurdle for an individual whose sole support is SSI. However, if an SSI recipient or their spouse worked and earned at least $2,500, they could become eligible for the refundable credit. Without this earned income, the nonrefundable portion of the CTC only reduces tax liability to zero.
Information Needed to Claim the Credit
To claim the Child Tax Credit, you must gather specific information before filing a tax return. A valid Social Security Number (SSN) is required for yourself, your spouse if filing jointly, and each qualifying child. The child’s SSN must be valid for employment and issued before the tax return due date. A child with an Individual Taxpayer Identification Number (ITIN) will not qualify for the Child Tax Credit.
You will also need documentation for any earned income, such as a Form W-2 from an employer or a Form 1099-NEC for independent contractor work. These documents provide proof of the earned income needed to claim the refundable portion of the credit.
If you expect a refund, you should have your bank’s routing number and your account number ready for direct deposit.
How to Claim the Child Tax Credit
Even if you are not typically required to file a tax return, you must file a 2023 federal tax return to claim the Child Tax Credit. The primary form for this is Form 1040, U.S. Individual Income Tax Return. On this form, you will list your dependents and calculate the credit using Schedule 8812, Credits for Qualifying Children and Other Dependents.
For many, the prospect of filing taxes can be daunting, but free resources are available. The IRS Free File program allows qualified individuals to prepare and file their federal income tax returns online using guided tax software at no cost.
For in-person assistance, the IRS supports Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs. VITA sites offer free tax preparation to people who make $64,000 or less, persons with disabilities, and limited English-speaking taxpayers. TCE provides free tax help, particularly for those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues.
Impact of the CTC on SSI Benefits
Receiving a tax refund will not reduce or eliminate your monthly SSI benefits. The Social Security Administration (SSA) does not consider tax refunds, including money from the Child Tax Credit, as income for SSI purposes in the month they are received.
The SSA also has a protective rule for how the refund is treated as a resource. SSI eligibility requires an individual’s countable resources to be below $2,000 for an individual and $3,000 for a couple. Federal tax refunds are excluded from this resource limit for 12 months after the month you receive the money.
This 12-month exclusion provides a window to use the funds. For example, if you receive your CTC refund in March, the money will not count toward your resource limit until April of the following year. This allows you to spend the money without impacting your SSI eligibility, as long as any unspent portion does not push you over the resource limit after the 12-month period ends.