Tax Treatment of SSI

• To be eligible to receive SSI, you must be age 65 or older, blind or permanently disabled. The Social Security Administration says that you must also have less than $2,000 in resources ($3,000 for couples) to be eligible. Resources include items like cash on hand, bank accounts and assets that you could sell to pay for food and housing. Since SSI benefits are available only to those with low income, it is considered a need-based welfare program. The Social Security Administration says SSI benefits are not considered income for federal income tax purposes, so any amounts you receive as SSI do not have to be included on an income tax return.
  
  

Earning Income with SSI

• If you earn income, the amount you earn can reduce your SSI benefit. The Social Security Administration says half of your earned income is subtracted from your SSI benefit after an $85 deduction and that the federal SSI benefit rate is $674 a month. If you made $500 a month in earned income, your SSI benefit would go down by one half of $415 or $207.50. Your $500 of earned income would be considered taxable by the Internal Revenue Service.
  
  

Other Welfare Benefits

• The IRS says governmental benefit payments from a public welfare fund based on need are not included in taxable, income. In other words, welfare payments you receive from other welfare programs besides SSI are not included in income for tax purposes. You do, however, have to include any welfare payments you receive as compensation for service you perform.
  
  

Considerations

• While SSI benefits are not taxable income, a portion of your Social Security benefits may be taxable. The Social Security Administration states that if your income is between $25,000 and $34,000 as a single filer, you may have to pay taxes on as much as half of your Social Security benefits and if you make more than $34,000, up to 85 percent of your benefits might be subject to income tax.