
Quoting
Janke
So, all my previous answers are wrong.
Social Security Disability does not increase because his bills have gone up. It doesn't decrease because bills have gone down. Social Security Disability is based solely on contributions via payroll taxes (FICA, OASDI) when he was working. Just like Social Security retirement. He gets paid Social Security Disability before retirement age because he is disabled, but the computation of monthly benefits is the same.
Social Security Disability can change if worker's compensation or public disability benefits start or stop. I think he is wrong to believe that his Social Security Disability will increase at age 62 because his disability retirement stops. It doesn't sound like either worker's comp (not injured on the job) or public (government funded) temporary disability benefits.
1. Social Security Disability, Social Security Retirement - neither change because a person has new/different/higher/lower expenses.
2. Social Security Disability/Social Security Retirement is not a welfare program. There are no limits on the amount of savings, the number of houses owned, the value of any asset. Benefits are not reduced because of sale of a house.
Social Security can be subject to income tax for higher income people (seniors, disabled) currently. Lots of people with high income don't believe that they will get "their Social Security" when they retire in 10, 20, 30 years. Who knows what laws will be passed by then. But today, Social Security is not a welfare program. He can own, rent, sell at a loss, sell at a profit, abandon his home and still get the Social Security Disability (or Retirement if he is over full retirement age. Whatever he wants. Now the IRS may collect capital gains taxes on the profit from the sale of the house if he doesn't buy another house. But that is a question for his income tax preparer. That is not a Social Security question.
You originally said he wanted to downside to a smaller home. I assumed that meant buying a home. He really needs to talk to his tax preparer because there will be tax consequences if he doesn't buy a new home. And that has nothing to do with being on Social Security Disability. Also, he will be paying higher income tax if he doesn't have a write off for interest on his mortgage payment. Renters don't get that adjustment.
Unlike seniors and auxilliaries, he gets paid Social Security Disability benefits because he is unable to perform Substantial Gainful Activity - unable to work. So don't apply Annual Earnings Test rules for retirees to him. He is not getting retirement benefits. The Work Incentives are too complicated to explain here. Go to socialsecurity.gov and read the Red Book of Work Incentives. Long. Complex. But there is NO exempt amount, not $7000, not $7250. There are trial work periods, unsuccessful work attempts, impairment related work expenses, substantial gainful activity, extended period of eligibility, expedited reinstatement, etc.
He needs an accountant. He may wish to go to his local Social Security office and try to talk to the work incentive specialist in the office. The service reps at the front counter may or may not be able to answer his questions adequately. You may wish to read his award notice to see what program he is on. You may want to do more research at socialsecurity.gov.
Cindy 1976 - today health insurance is a choice. When the regulations are drafted and the policy wonks come up with the complicated regulatory rules to enforce the new legislation, then health insurance will be mandatory (still not sure how that will be enforced but that is another post). And still, not having health insurance means a person will be fined. No doubt there will be people who aren't afraid of the fine or who work off the books, under the radar, off the grid. Does the threat of IRS fines currently stop everyone from committing fraud? Pamela Anderson is in trouble with the California Franchise Tax Board. Nicholas Cage, and another famous actor who's name escapes me didn't pay their income taxes. US citizens ignore regulations all the time. And sure it sometimes catches up with you.
If he has capital gains on the house and doesn't buy another equal value house, he may inded have to pay income taxes on the profit. Where do you think the government is going to get the money to pay for mandatory health insurance? Taxing capital gains is a favorite method of politicians who are looking for more taxpayer dollars to spend. Selling his house with a profit will move him into a higher income tax bracket. None of that has anything to do with Social Security benefits or FICA/OASDI taxes.