Question

I have a question related to earned income tax credit disability — If I’m on disability, do I qualify for the EIC?

Answer

If you’re considering taking the tax credit used by millions of Americans – the Earned Income Tax Credit (EIC) – then you probably want to know if you can claim it if you are on receiving disability payments.

Is Disability Earned Income?

If you’ve wondered, “Is my disability payment earned income?” then here’s the answer. For the Earned Income Credit disability payments might qualify as earned income depending on both of these:

  • The type of disability payments you’re receiving,
  • If you’ve reached your employer-plan’s minimum retirement age.

Note that Social Security Disability Insurance, SSI, or military disability pension benefits aren’t considered earned income.

Retired and Claiming Disability

If you retired on disability, taxable benefits from your employer’s disability retirement plan are earned income. This applies until you reach minimum retirement age. So, you can count that income for EIC purposes.

Your plan defines the minimum retirement age. It is the earliest age you would be able to receive a pension under the plan. Starting the day after you reach minimum retirement age, those disability retirement payments are taxed as pension payments. So, they’ll no longer be earned income for EIC purposes. At that point, you must have some other source of earned income to be eligible for the Earned Income Tax Credit.

You might receive payments from a disability insurance policy that you paid premiums for. If so, those payments aren’t earned income for EIC purposes. This applies whether or not you’ve reached the minimum retirement age.

More Help With Disability & Earned Income Tax Credit

Navigating the ropes of disability & Earned Income Tax Credit can be confusing, which is why we are here to help. Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to help you.

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