Can I Receive Disability Benefits If I’m Self-Employed?

December 15, 2023

Self-employment means that you operate a trade, business, or profession either by yourself or with a partner or spouse. This includes independent contractors and sole proprietors of small businesses, freelance performers and professionals.

Being your own boss comes with its own freedoms and responsibilities. However, if you become ill or are unable to work because of a disability, you may not have the same options as you would have if you had worked for an employer.

If you are self-employed, you can still apply for disability benefits. But whether or not you qualify largely depends on your work history and how much you’ve paid in taxes.

How Do I Qualify for Social Security?

Social Security is funded by taxpayers. By paying into Social Security and keeping gainful employment, taxpayers earn work credits. A person qualifies for disability benefits once they’ve earned enough work credits.

If you were an employee of someone else, then your employer would automatically deduct a portion of every paycheck for Social Security taxes. But if you’re self-employed, you pay all of your Social Security taxes at once when you file for taxes in April.

The amount that you pay into Social Security affects how many work credits you earn every year. If you haven’t earned enough work credits, then you may not qualify for SSDI.

Note: If you make enough money from freelance work, you may decide to register as an LLC, or limited liability company. If you are registered as an LLC and treat yourself or your small business as a corporation, then different tax rules would apply.

If you make $400 or more a year after business deductions, then you will have to fill out Schedule SE (Form 1040) to determine how much self-employment taxes you owe to Social Security, which should give you an idea of how many work credits you’ve earned that year.

If you make less than $400 a year, you don’t have to file for taxes and so you aren’t able to pay into Social Security. You can still earn Social Security work credits, though; we’ll go over how to do that in the next section.

How Do I Earn Work Credits?

The amount of money you need to make to earn one work credit varies by year. In 2019, you would earn one work credit for every net $1,360 that you earn.

The maximum amounts of credits you could earn during the year is four. You would only need net earnings of $5,440 a year to get the maximum amount of work credits.

The amount of work credits you need to qualify for disability benefits depend on how old you are when you apply. Younger freelancers could need as little as six work credits, or three years of work history, to qualify for disability benefits. Nobody needs to earn more than 40 credits, or 10 years of work.

Part-Time Self-Employment

If you work freelance on top of a part- or full-time job to supplement your income, gain work experience, or just to do different work than what you could do during your 9 to 5 job, you may still have to file for self-employment taxes even though you’re already paying into Social Security with your wages.

If you make more than $400 a year from side gigs, you’ll have to fill out Schedule SE to pay into Social Security (unless you make more than $132,900 a year, in which case different rules apply).

What If I Made Less Than $400 This Year?

Freelance work doesn’t always pay the same amount every year. If you’re just starting off or can only pick up small gigs on the side, you may not make enough money to pay into Social Security. But you can still earn work credits even if you don’t pay Social Security taxes.

If you make less than $400 in net earnings for 2 out of the 3 years before you apply, then you can use the optional method to earn work credits. But you can only use this optional method five times total over your entire work history.

Get Help from a Fishers Social Security Disability Attorney

If you’re unsure if you qualify for Social Security disability, or if you aren’t sure how to start the Social Security application process, a local disability benefits attorney can help. Give us a call or contact us online today for a free conversation about your disability claim.