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Find out if your disability benefits and the refund you get for the EITC qualify as earned income for the Earned Income Tax Credit (EITC) and if EITC affects other government payments.
Find out how you can claim a child of any age if the person has a total and permanent disability.
If you're unsure if you qualify for the EITC, use the EITC Qualification Assistant.
Disability benefits and earned income rules
If you get disability payments, your payments may qualify as earned income when you claim the Earned Income Tax Credit (EITC).
Disability payments qualify as earned income depending on:
- The type of disability payments:
- Whether you have reached your minimum retirement age
Disability retirement benefits
Disability retirement benefits received before you reach the minimum retirement age are considered earned income.
To find your minimum retirement age, check your retirement plan. The minimum retirement age is generally the earliest age you could receive retirement benefits if you weren’t disabled.
After you reach the minimum retirement age, your disability retirement payments do not qualify as earned income for the EITC.
For more information on disability retirement benefits and the EITC, see Rule 7 in Publication 596, Earned Income Credit (EIC).
Disability insurance payments
Payments received from disability insurance for which you paid the premium aren’t earned income. If the policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code J.
For more information about disability insurance and the EITC, see Life insurance & disability insurance proceeds.
Other disability benefits
Other disability benefits don’t count as earned income when you claim the EITC. These include:
- Social Security Disability Insurance
- Supplemental Security Income (SSI)
- Military disability pensions
- Veteran Administration rehabilitation payments
For more information, see Publication 596, Earned Income Credit.
How the EITC affects other government benefits
Refunds you received from the EITC or other refundable credits are not considered income. The refunds are not counted as a resource for at least 12 months from when you receive it for benefits or assistance under any Federal or State or local program financed in whole or part with Federal funds.
To find out if this rule applies to your benefits, check with your benefit coordinator.
Claim a qualifying child with a disability
The qualifying child you claim for the EITC can be any age if they:
- Have a permanent and total disability and
- Have a valid Social Security number
If the child receives disability benefits, they may still be your qualifying child for the EITC. Find out more about the additional tests for a qualifying child.
Permanent and total disability
A person has a permanent and total disability if both of the following apply:
- They can’t engage in any substantial gainful activity because of a physical or mental condition and
- A doctor determines their condition:
- Has lasted continuously for at least a year or
- Will last continuously for at least a year or
- Can lead to death
How to prove a permanent and total disability
You must prove that your child has a permanent or total disability.
To prove your child's disability, get a letter from their doctor, healthcare provider or any social service program or agency that can verify their disability.
Sheltered employment and substantial gainful activity
We do not consider sheltered employment “substantial gainful activity.”
Sheltered employment is when a child with a physical or mental disability works for minimal pay under a special program.
If people with physical or mental disabilities work for minimal pay, it must be done at a qualified location. Qualified locations include:
- Sheltered workshops
- Hospitals and similar institutions
- Homebound programs
- Department of Veterans Affairs (VA) sponsored homes