Seeking SSD While Self-Employed

A pair of hands using calipers to measure a piece of wood, which represents the difficulty of the calculations necessary when applying for SSD coverage while self employed

Many self-employed people contact us with questions about applying for disability.  Working for yourself if you have a chronic physical or mental health issue makes a lot of sense: you can make your own hours and scale up or down depending on how you feel.  We’ve heard from folks continuing to work in a self-employed capacity as lawyers, medical professionals, consultants, carpenters, small business owners, stylists, and more.

The first question the government analyzes when someone applies for disability benefits is whether the applicant is engaging in “Substantial Gainful Activity”. This is fairly simple to evaluate when a person is an employee and earning wages. If those wages exceed the monthly cap for “Substantial Gainful Activity” ($1180 in 2018) the applicant is likely to be denied disability benefits.

For self-employed people who are also considering applying for disability, the analysis is more difficult. The Social Security Administration has three complicated tests to see if a person’s earnings in self-employment disqualify them from applying for disability benefits.

Here are the three tests, and my simplified explanation of each one:

  1. You will be denied if you are the only person running the business and earn at least $1180 each month in net income.  If anyone else works for your business, you will be denied if you are spending 45 or more hours each month managing the business and are earning at least $1180 each month in net income.
  2. You will be denied if your livelihood from the business is comparable to that of the person who owned the business before you (or similar to that income derived by other folks in your community in the same or similar business) or is similar to your income you were earning before you became disabled—even if you are netting less than $1180.
  3. You will be denied if your efforts in the business would cost more than $1180 in wages to have someone else perform.

If you are considering applying for disability benefits and are self-employed, it is important to consider what evidence you have to support that you shouldn’t be denied under any of the above tests.  Of course, you will want a clear statement of your net earnings.  Schedule C of your federal tax return is an excellent place to start for most people.  You will also want to do some research about how much other people in similar businesses are earning from their work.  Finally, you will want to research what it would cost to pay someone to do the work that you are performing.