Are Government Disability Benefits Counted as Income?

Christian Worstell
In this article...
  • Learn about disability benefits, including social security and supplemental security income. Learn how to apply, how to manage your benefits and claims and explore your rights as a recipient.
Home Health Nurse With Patient

This article examines the particulars of disability benefits and income, including what social security disability is and who can access it, as well as differentiating supplemental security income from SSDI.

Table of Contents:


What Are Disability Benefits?

Disability benefits are public funds accessible to those with physical or psychological impairments that restrict their ability to gain employment.

These benefits can help to offset the cost of medical care, living expenses, and other needs. To qualify for disability benefits, applicants must meet the SSA's eligibility requirements.

In order to meet the SSA's eligibility requirements:

  • Applicants must have a physical or mental impairment that has persisted for at least 12 months or is expected to continue doing so.

  • The impairment precludes them from engaging in any substantial gainful activity.

  • Applicants must demonstrate that they worked before their impairment and cannot adjust to other types of work due to their age, education level and/or experience.

Types of Benefits Available:

The SSA offers two main types of disability benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).

  • SSDI provides monthly payments based on your prior earnings history
  • SSI pays out a flat rate amount each month regardless of past income levels.

Both programs also provide additional resources such as Medicare coverage after 24 months of receiving SSDI payments and Medicaid eligibility with either program depending on the state you live in.

Typically, it takes three to five months to hear back from the Social Security Administration about a disability claim, after providing all necessary documentation. Utilize this time to ensure everything is in order and double-check that no detail has been overlooked.

Once approved for disability benefits, it be aware of your rights while receiving these funds. This includes understanding:

  • The type of employment opportunities they can pursue without jeopardizing their benefit payments

  • What will happen if there is an alteration in health status

  • Any tax implications related to this income source

  • Federal regulations that may modify the amount received.

For those unable to work due to a disability, disability benefits may offer financial assistance. It is important for individuals to understand how these benefits count as income when filing taxes or applying for other government programs. 

How Do Disability Benefits Count as Income?

When it comes to disability benefits, understanding how they count as income is essential for managing your finances. Disability benefits may be taxed, potentially influencing one's eligibility for other government services like Social Security or Medicaid.

Here’s a breakdown of the different ways that disability benefits are treated when it comes to taxes and other financial considerations.

The IRS generally considers any disability benefits you receive to be taxable income, though some of these funds may qualify for exemption if your medical expenses exceed 10% of your AGI. It’s important to consult with a tax professional who understands the nuances of these rules in order to maximize any potential tax breaks available to you.

Receiving disability benefits may potentially diminish or even nullify your Social Security payments each month, depending on the amount of money you make.

The Social Security Administration considers all sources of earned and unearned income when determining eligibility for their program, such as:

  • Wages
  • Investments
  • Retirement accounts
  • Pensions
  • Alimony payments
  • Disability benefits

If you think that receiving additional money from disability might negatively impact your Social Security benefit amount, be sure to speak with an expert before taking action so that there aren’t any surprises down the road.

Veterans who receive both VA compensation due to service-connected disabilities and other forms of government aid such as SSDI/SSI or railroad retirement checks should know that monies paid out through Veterans Affairs will never count against them when determining total monthly benefit amounts.

This type of funding source is not included in the calculation process at all, so it pays to keep this helpful tidbit tucked away safely somewhere just in case it is needed later on.

To be eligible for disability benefits to be included as taxable income, certain criteria must be met. 

How to Apply for Disability Benefits

Applying for disability benefits can be a complex process, but it doesn’t have to be overwhelming. To initiate the procedure for acquiring disability benefits, an application must be filled out and evidence of impairment presented. Submitting medical documents and other relevant information that corroborate your disability may be necessary when applying for benefits.

  • Gather all necessary documentation such as test results, medical records from doctors, hospitals or clinics and any other evidence that supports your claim. This includes information about any previous attempts at receiving disability benefits and details about current employment status if applicable.

  • Once you have the required documentation, apply for disability benefits either electronically or in person at a regional office. You can also apply by calling the Social Security Administration at 1-800-772-1213 (TTY 1-800-325-0778).

  • When filling out the disability benefits application, make sure to include accurate information regarding prior work history, medical conditions/diagnoses that limit daily activities and any impairments related to those conditions/diagnoses including pain levels experienced on a regular basis if applicable. If possible, include statements from healthcare providers who are familiar with your condition(s). 

Applying for disability benefits can be a complex process, but it doesn't have to be overwhelming. Once you have submitted your application, all that remains is to wait for a response from SSA regarding the status of your claim.

Understanding Your Rights as a Recipient of Disability Benefits

As a recipient of disability benefits, you are entitled to certain protections which must be upheld by all parties involved. It is imperative to be aware of your rights so that you can safeguard yourself and guarantee your benefits are not abused or revoked without valid justification.

  • Your first right as a disability benefit recipient is the right to appeal any decisions made regarding your benefits.

    This includes decisions related to eligibility, denial of services, or changes in payment amounts. You also have the right to receive written notification of any decision being made about your benefits and an explanation for why it was decided upon.

  • You're also entitled to secrecy when engaging in matters associated with disability.

    This means that information shared between you and medical professionals cannot be disclosed without consent unless required by law enforcement agencies during investigations into potential fraud cases involving SSDI payments or other matters related directly to public safety concerns. This applies even after death.

Under the Ticket To Work program, those receiving SSDI payments are entitled to work incentives that grant them protection against a reduction of their cash payments should their income exceed set limits and allow for time off from work without penalty if health deteriorates significantly. Moreover, they may be able to resume employment when their health improves back up towards full working capacity. 

Resources for Managing Your Disability Benefits

For those looking to make the most of their disability benefits, financial advisors and support groups can provide invaluable assistance in managing funds and investments. Financial advisors can provide valuable guidance on how to best manage your funds and investments in order to maximize returns. Moreover, those with disabilities can find support and advice from fellow peers in specialized networks. 

For those seeking financial advice, finding a reputable advisor is essential. When looking for a financial advisor, it is important to make sure they comprehend the intricacies of disability benefits and have knowledge dealing with customers who receive them. Look for someone who has been certified by organizations like Certified Financial Planner Board of Standards Inc., which ensures that professionals adhere to ethical standards when providing financial services.

Support groups are another great resource for individuals receiving disability benefits. These networks allow people with similar experiences to come together and discuss their unique challenges while offering mutual support along the way. Many local communities have these types of groups, so be sure to check online or ask around at local hospitals or community centers if one exists near you.

Various government assistance programs, such as Medicaid, SSI, Veterans Benefits, Medicare, SNAP, TANF and CHIP are available to those with disabilities who may require financial aid beyond that provided by traditional disability insurance plans. Do your research and be aware of all the potential resources that could provide assistance for those who require additional help.

By utilizing all accessible resources, you can save money while still preserving your health and wellbeing in the long run.

Disability Benefits FAQs

What are the benefits of having a disability?

Having a disability can provide access to many benefits and resources. These include Social Security Disability Insurance (SSDI) payments, Medicaid or Medicare coverage for health care needs, housing assistance programs such as Section 8 vouchers, employment opportunities through the Ticket to Work program, and other financial support programs like Supplemental Security Income (SSI).

Legal safeguards exist to guarantee persons with disabilities have identical rights under the law. With these benefits in place, individuals with disabilities can live healthier lives while having greater financial security.

What are the cons of disability benefits?

There may be restrictions on how much money one can receive from the government or other sources due to their disability status. People with disabilities may encounter prejudice in areas like housing and schooling. Finally, it is important to note that disability benefits are not always enough to cover all expenses associated with living with a disability which could lead to further financial strain.

What is the most approved disability?

The most approved disability is Social Security Disability Insurance (SSDI). SSDI furnishes financial assistance to people who are debarred from working owing to a medically determined physical or psychological disability which has gone on for, or is anticipated to last, at least one year.

To qualify for SSDI, applicants must have worked and paid into the Social Security system through payroll taxes. The amount of money received depends on an individual's earnings history before they became disabled.

What happens to my 401k if I go on disability?

If you go on disability, your 401k plan will remain in effect. However, depending on the type of disability and how long it lasts, you may be eligible for a distribution from the plan without incurring an early withdrawal penalty. Moreover, you may be able to benefit from a special tax exclusion for the amount of your distribution.


It is essential to be conscious that disability benefits are deemed as income when submitting taxes or seeking other forms of support. By understanding your rights and the income implications of receiving disability benefits, you can maximize their value while managing your finances responsibly.

Christian Worstell
About the Author

Christian Worstell is a senior Medicare and health insurance writer with He is also a licensed health insurance agent. Christian is well-known in the insurance industry for the thousands of educational articles he’s written, helping Americans better understand their health insurance and Medicare coverage.

Christian’s work as a Medicare expert has appeared in several top-tier and trade news outlets including Forbes, MarketWatch, WebMD and Yahoo! Finance.

While at HelpAdvisor, Christian has written hundreds of articles that teach Medicare beneficiaries the best practices for navigating Medicare. His articles are read by thousands of older Americans each month. By better understanding their health care coverage, readers may hopefully learn how to limit their out-of-pocket Medicare spending and access quality medical care.

Christian’s passion for his role stems from his desire to make a difference in the senior community. He strongly believes that the more beneficiaries know about their Medicare coverage, the better their overall health and wellness is as a result.

A current resident of Raleigh, Christian is a graduate of Shippensburg University with a bachelor’s degree in journalism. You can find Christian’s most recent articles in our blog.

If you’re a member of the media looking to connect with Christian, please don’t hesitate to email our public relations team at

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