Does Passive Income Affect Social Security Disability Benefits?

SSD Passive Income|Hurt On The Job

If you receive social security disability benefits, it is critical to stay on top of the income parameters set out by the social security disability insurance to ensure that you can continue to receive your benefits if your income levels change. If you have an SSDI benefit and are concerned that your monthly benefit may decrease due to passive income, it is best to seek out legal advice from an experienced NY Social Security Disability Lawyer to ensure your disability payments are protected.

What Are Social Security Disability Benefits?

If you are a disabled individual and unable to hold gainful employment, you may be entitled to SSDI monthly payments based on the amount of money that you have contributed to the Social Security system during the time you were employed. To qualify for disability benefits, the Social Security Administration must determine that you are both completely disabled and entitled to receive disability benefits through social security. 

Once you have received your determination, you will also be subject to certain limitations about the amount of money that you can earn. If your earnings exceed these limits, then the Social Security Administration may determine that you are no longer disabled, and cease your benefits due to your work activity. 

For some people, their main income may come from what is known as passive earnings which do not count as a work activity. 

What is Passive Income?

Passive income refers to income that takes little effort to both receive and maintain. The earner of the passive income will not directly participate materially in the business activities related to it. Many government agencies, including the United States Internal Revenue Service, consider these earnings as separate from earned income through regular, contractual, or self-employment and will not always levy standard income tax on these earnings.

What is Unearned Income?

Money that is earned through means other than employment may also be referred to as unearned income. This type of income includes any monetary amount that is not earned through regular or contractual employment. There are some forms of unearned income that SSA may look at when determining if you qualify for benefits such as:

  • Workers' compensation
  • Retirement benefits
  • PEnsions
  • Veterans' benefits
  • Unemployment
  • Household expenses paid by others for you
  • Inheritance payments
  • Life insurance
  • Child Support 
  • Income from investments
  • Union benefits
  • Alimony
  • Income from rental properties 

While some of these types of unearned income may be taken into consideration when determining if you qualify for social security disability benefits, not all will. This makes choosing a law firm that can know what can affect benefit payments is crucial when applying for SSDI.

Types of Income That Social Security Disability Consider Passive

They are three primary earning activities that would be considered passive for disability insurance benefits. 

  • Profits from the ownership of property such as rental income or cash that flows from real estate are both consider passive forms of income. 
  • Business activities or trade that earn you money, but you do not materially participate in during the year would be passive. This is more common with owners of businesses. 
  • Royalty payments that are made to you to use intellectual property as long as they are not derived during an ordinary course of business of trade. 
  • Some limited partnerships where the partner does not participate in any of the activities of the business or company. 

What Does SSDI Consider Rental Property?

To make sure that your SSI benefits are not affected by income from rental properties you will have to make sure that the property is considered a legitimate rental under the Social Security Administration rules. Some ways that a rental may be excluded as a rental property when considering disability benefits are:

  • If the customer occupies it for a period of fewer than seven days.
  • If the customer use is less than 30 days total when significant personal services were provided, such as maid service. 
  • You do not perform any physical work on the rental properties yourself.

Will Passive Income Reduce SSI Benefits or Make You Ineligible?

Since passive income is money earned that is not related to a work activity or your ability to perform it, most forms will not be taken into account by the SSA when they are determining your eligibility or the amount of monthly benefit you are entitled to receive. 

It is always best when receiving passive income to maintain a hands-off approach to ensure that it is not considered work on your part. This can be done by hiring managers and maintenance people to take care of your rental properties. If investing, have a money manager or stockbroker manage your account. This way the income will be earned through capital appreciation and not actually work in researching and choosing stocks. 

If Your Social Security Disability Benefit is Denied, Can You Appeal?

You can appeal a decision if you are denied disability payments in the state of New York, though the process can be lengthy. If you proceed with an appeals process it is highly recommended that you hire an experienced social security disability lawyer to ensure that you follow proper procedure and your appeal has the best chance for being considered. When you appeal a decision there are a few channels you will have to go through.

  1. You will need to file for a reconsideration which will have a different SSA examiner review the case to see if the decision should be changed.
  2. New evidence will then be heard at an Administrative Law Judge Hearing to see if the new evidence warrants a different decision. 
  3. If incorrect procedures were behind your denial than you may be able to have your case heard by the Appeals Council. If procedural problems were determined in will then go back to the ALJ to be retried.
  4. If all other appeal attempts to the SSA fail, you can appeal your case to the federal court of New York. 

Since the appeals process can mean being without benefits for a significant amount of time, it is prudent to hire an SSDI attorney before beginning the application process. 

Choose an Experienced Disability Attorney

Having a passive income can make applying for social security disability payments more challenging, and to ensure you get the best outcome for your case you should start by calling Terry Katz & Associates an NYC Social Security Disability Law office who knows the ins and outs of the disability benefits process and can guide you step-by-step. Please call (516) 997-0997 or contact us for a free consultation with an experienced NY SSD attorney at our Long Island law office.


Terry Katz, Esq.
Terry Katz, Esq., the founding Member of the firm, handles all aspects of Workers’ Compensation and Social Security Disability cases.
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