In the disability evaluation process, individuals who found to be engaging in “Substantial Gainful Activity” will be denied disability benefits.
With self-employed individuals, Social Security does not simply use the standard Substantial Gainful Activity limit ($1070 per month in 2014) but applies three different tests to be sure that the self-employed person is not simply paying themselves less in order to be eligible for disability benefits.
If the answer to any of the following three tests is “yes” then Social Security will conclude that you are over the Substantial Gainful Activity limit and will be denied disability benefits.
Test one: You have engaged in substantial gainful activity if you render services that are significant to the operation of the business and receive a substantial income from the business.
- For most applicants, if a person operates a business entirely by themselves, contributes more than half the total time required for managing the business, or if they perform management services for more than 45 hours a month, they will be considered to be “rendering significant services”.
- The calculation for “substantial income” is complicated, but it takes into account business expenses, unpaid help provided by others, and impairment related work expenses. Even if your countable income is below the Substantial Gainful Activity benchmark when all of these factors are considered, you may fail the “substantial income” element of this test if you earnings are comparable to what you made before you became impaired or if your countable income is comparable to the earnings of an unimpaired self-employed person in your community doing the same work.
Test Two: You have engaged in substantial gainful activity if your work activity, in terms of factors such as hours, skills, energy output, efficiency, duties, and responsibilities, is comparable to that of unimpaired individuals in your community who are in the same or similar businesses as their means of livelihood.
Test Three: You have engaged in substantial gainful activity if your work activity, although not comparable to that of unimpaired individuals, is clearly worth the Substantial Gainful Activity benchmark when considered in terms of its value to the business, or when compared to the salary that an owner would pay to an employee to do the work you are doing.
Documentation of your working hours, duties, assistance received from others, business expenses, impairment-related expenses and income will be critical if you are a self-employed individual seeking disability benefits.
Each self-employed individual’s earnings will be evaluated on a case-by-case basis. Some self-employed individuals may be found to engaging in substantial gainful activity, while others may not.
For more information:
- Read Social Security’s policy statement on the how they will determine if a self-employed person’s work is substantial gainful activity.
- Read more about Social Security’s rules regarding self-employment income at 20 CFR § 404.1575.