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  1. #1
    Join Date
    Apr 2010
    Posts
    20

    Default Changes in Financial Situation While on SSI

    I found this board and really enjoy all the information and appreciate the time many of you spend in helping others.

    I found this board to ask a medical question and as I was looking around I notice all the other information.

    I have a two part question if it is ok to ask them both.

    1. My brother in law was nearly killed by a drunk driver a couple years ago and is disabled from the accident. He is on SSI and gets a retirement from his 20 year employer which is part disability and part retirement. The company provided free health care for him and his family for life or while is he disabled.
    In January they changed from the free health care to charging him for his wife and two kids 696.00 per month for their health care.
    I told him that I heard once that when someone is on SSI and their retirement income gets reduced that the SSI increases to cover the losses.
    His disability payment from his work stops at age 62 and he losses it totally and was told at that time the SSI will increase to cover that loss.
    With that said would this not be the same? Taking 696.00 out of his monthly pay is reducing the monthly income.
    Can he get the SSI changed to cover the losses?

    2. He wants to sell his home as they are not making the money they once did and want to downside to a smaller home with a less payment to make. He said he has 75,000 in equity in the home. He was told if he sells the home that his SSI will be taken away because the 75,000 would be considered income and they will stop all payments to him until they reach the 75,000 payout. This does not sound correct to me as he would be getting penalized for having equity in his home.
    How does this work? Will he lose his monthly payments because he wants to downsize to a smaller home? Is the 75,000 considered income that will effect his SSI payments or will it be taxed and he keeps his monthly paycheck. I think he said he can only make up to around 7,000 a year anyway and this would be a lot more then that.

    I surely would appreciate any help on these two issues.

    I do not want them to lose their income because I do not want to see my niece and nephew suffer because of his disability and having equity in the home.

    Thank you.

  2. #2
    Join Date
    Jan 2009
    Location
    California
    Posts
    1,045

    Default Re: Important Question

    1. Unfortunately for him, the answer is no. SSI considers the amount of gross income in determining payment, not the net. Withholding for insurance premiums, taxes, child support payments etc. does not reduce the gross. Having insurance coverage is a choice (a good albeit expensive choice in this case) but it is a choice. It is a bill. SSI does not increase because bills increase. Can the family qualify for Medicaid? If the dad is on SSI, that means the family is a low income family. California has a Healthy Children program through Medicaid/Medi-Cal, for instance.

    2. You got incorrect information on the sale of house. SSI excludes the equity in a home from the resource limits. Also, there is a provision for a 3 month exclusion of the proceeds of a sale if the intention is to purchase another home. Called home replacement exclusion. Assume the house was sold in 5/10 and $75,000 deposited into the bank. As long as the $75,000 was then invested in a down payment for a new home by the end of 8/10, the money would be excluded. Once all the money goes into the purchase of the new home, it would be excluded again.

    If he doesn't follow that scenerio, there could be different results. Can he find a house to purchase within 3 months after the sale? The sale itself can take many months as well. He could make an offer on a house he likes that is contingent upon the sale of his own house. It may not get accepted by the seller, but you never know until you try.

    His comment about being able to make $7000 confuses me. I don't know of any provisions that allow that. Wages have a small exclusion, but non-wage income either counts or it doesn't count. SSI is the supplemental program; you don't get to supplement the SSI.

  3. #3
    Join Date
    Apr 2010
    Posts
    20

    Default Re: Important Question

    I am sorry I am trying to help them and do not know a lot of information.

    It must not be SSI then because they have never been low income.

    He gets disability from Social Security for it might be called something different then SSI. His retirement and disability income together are very high as a total.

    I do not think they want to purchase another house in this economy, with many homes still on the down swing he does not want to risk purchasing if the homes are still moving to the negative.

    If he does not invest the equity of the sale of the home then does he loose his monthly paycheck for a period of time for having equity in his home?


    He was told he could make 7,000 per year without any problems, anything over the 7,000 ( I think he said 7,250.00? to be exact ) would be taxed or taken away from his total amount. That is why I believe it might not be called SSI then after you mentioned that. Could it be called SSD?

    Most seniors on social security and retirement can only make up to a certain amount also if I remember.

  4. #4
    Join Date
    Jan 2009
    Location
    California
    Posts
    1,045

    Default Re: Important Question

    Quote Quoting Cindy1976
    View Post
    I am sorry I am trying to help them and do not know a lot of information.

    It must not be SSI then because they have never been low income.

    He gets disability from Social Security for it might be called something different then SSI. His retirement and disability income together are very high as a total.

    I do not think they want to purchase another house in this economy, with many homes still on the down swing he does not want to risk purchasing if the homes are still moving to the negative.

    If he does not invest the equity of the sale of the home then does he loose his monthly paycheck for a period of time for having equity in his home?


    He was told he could make 7,000 per year without any problems, anything over the 7,000 ( I think he said 7,250.00? to be exact ) would be taxed or taken away from his total amount. That is why I believe it might not be called SSI then after you mentioned that. Could it be called SSD?

    Most seniors on social security and retirement can only make up to a certain amount also if I remember.
    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.

  5. #5
    Join Date
    Apr 2010
    Posts
    20

    Default Re: Important Question

    Quote Quoting Janke
    View Post
    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.
    Thank you so much for taking your time to explain this in so much detail.
    I am totally confused myself because he was told and believes his SS disability income will be reduced because of his adding the equity to his taxes the following year. Like you said his income will rise and put him into a new tax bracket but I do not think it will be actually called income because he never worked to earn it or was not paid for doing something.

    I agree, he needs an accountant because I do believe the equity ( if not reinvested in that period of time ) will not be counted as income now that I have read your post. It will show on the tax form but will not lower his SS checks. ( Thanks to you I understand that now )

    Your No. 2 answer is great, I cannot wait to call him tomorrow and let him know this so he wont be so worried that his check will shrink.

    He was told that when he hits age 62 and his disability retirement check from the company stops that the SS disability check will rise to cover the difference because it is currently reduced because of his ability to collect two types of checks from his former employer. One check is a disability retirement and the other is based on his years of service. At at 62 the disability stops and he was told that once that does and he is no longer collecting it the reduced amount he gets will be covered by SS.

    He said his SS amount was reduced because he was getting both checks from the former employer.

    I am going to the websites and look around to see if I can learn enough explain it better.

    I do appreciate the time you put into your answers and the explanation, links etc.

    Thank you.

  6. #6
    Join Date
    Jan 2009
    Location
    California
    Posts
    1,045

    Default Re: Important Question

    The equity will not be counted as wages or self-employment income on his 1040 (line 7 or line 12) but the any profit from the sale of the house (sales price minus purchase price minus any approved capital improvement expenses over the years) may be subject to Line 13 (schedule D) and taxable.

    Can you tell I have my tax return handy?

    He can contact Social Security and see if there is any offset on his Social Security Disability benefits. But since he wasn't injured on the job, it is unlikely he is getting worker's comp. And since it is paid by his employer, it probably doesn't meet the definition of a public disability benefit. I am not sure he is correct about a current reduction in his Social Security. His award notice should also provide any offset information.

    That's a pretty important part of financial planning for him. Don't know how close he is to age 62, but it would be nice to know for sure now.

  7. #7
    Join Date
    Apr 2010
    Posts
    20

    Default Re: Important Question

    Quote Quoting Janke
    View Post
    1. Unfortunately for him, the answer is no. SSI considers the amount of gross income in determining payment, not the net. Withholding for insurance premiums, taxes, child support payments etc. does not reduce the gross. Having insurance coverage is a choice (a good albeit expensive choice in this case) but it is a choice. It is a bill. SSI does not increase because bills increase. Can the family qualify for Medicaid? If the dad is on SSI, that means the family is a low income family. California has a Healthy Children program through Medicaid/Medi-Cal, for instance.

    2. You got incorrect information on the sale of house. SSI excludes the equity in a home from the resource limits. Also, there is a provision for a 3 month exclusion of the proceeds of a sale if the intention is to purchase another home. Called home replacement exclusion. Assume the house was sold in 5/10 and $75,000 deposited into the bank. As long as the $75,000 was then invested in a down payment for a new home by the end of 8/10, the money would be excluded. Once all the money goes into the purchase of the new home, it would be excluded again.

    If he doesn't follow that scenerio, there could be different results. Can he find a house to purchase within 3 months after the sale? The sale itself can take many months as well. He could make an offer on a house he likes that is contingent upon the sale of his own house. It may not get accepted by the seller, but you never know until you try.

    His comment about being able to make $7000 confuses me. I don't know of any provisions that allow that. Wages have a small exclusion, but non-wage income either counts or it doesn't count. SSI is the supplemental program; you don't get to supplement the SSI.
    With all due respect health care is no longer a choice, with the new health care bill you are required to purchase insurance or you will be fined.

    So he is going to be penalized for doing well enough to have equity in his home and being disabled by a drunk driver who had no insurance or assets?

    If he turns this in on next years taxes how will be be penalized? Will they take away his SS check for months on end until it reaches the 75k in equity?

    If so, that would be a total shame and not right I would not think. He would be penalized for having equity in his home.

    I must be missing something here.

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