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Social Security Disability and Rental Property

Whether passive income from a rental property will affect your disability benefits through Social Security depends on which kind of disability benefits you receive. Social Security Administration (SSA) provides two kinds of benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). SSDI benefits are determined based on your prior work history whereas SSI benefits are provided to eligible individuals who have extremely low income and few resources.

Rental income is almost always considered passive income. Passive income is income that takes minimal effort to receive and maintain. As such, it is not considered earned income for which you were paid wages. If you do not participate directly in the business activities related to the income in a material way, that income is likely passive.

If you collect SSDI, only earned income will affect your benefits. Although rental property is usually considered unearned income, SSA may view it as earned income if any of the following applies to you: 1) you perform services for a tenant beyond the normal care and maintenance of the property; 2) you receive rental income in the course of your trade as a real estate dealer; or 3) you participate materially in a farming operation. Consider hiring property managers and maintenance workers to take care of your rental property and ensure that anything you do with respect to the property is not considered work that could qualify as earned income.

The SSDI program does not put a limit on the amount of unearned income you can receive and still qualify for benefits. Therefore, your eligibility will not be affected by cash gifts, investments, or inheritances, for example, even if you receive any them after you have been approved for benefits. In 2021, however, you cannot earn more than $1,310 per month and remain eligible for benefits because, at that point, you have reached the threshold for substantial gainful activity and will no longer be considered disabled.

Although SSDI does not have asset/resource limits, SSI does. If you own a rental property, that will probably disqualify you from receiving SSI benefits because you cannot own more than $2,000 in assets as an individual or $3,000 in assets if you are part of a married couple. If the rental property does not automatically disqualify you, the amount of money you receive in benefits will decrease if your unearned income exceeds $20 per month or your earned income exceeds $65 per month.

You may be able to remain eligible for SSI benefits and own rental property. If you became disabled before age 26, you may be able to set up an ABLE account to shield up to $100,000 from SSI’s resource limit. ABLE accounts can only be used to pay for qualified, disability-related expenses, such as education, housing, and medical care. If, however, the value of the property you own and any money you have that is not in the ABLE account exceeds the SSI income and resources limits, you will likely be denied for SSI benefits or have existing SSI benefits terminated.

Should your financial situation change, you are required by law to notify SSA if you receive SSDI ore SSI benefits. If you are concerned about potential impacts to existing benefits, seek the advice of a trusted Social Security disability attorney who can advise you on what your options may be.