Tax Reform May Impact Disability Benefits

Q: How might income tax reform impact disability benefits?

If you thought applying for Social Security disability benefits in Arizona was confusing, understanding the various programs administered through the Social Security Administration can be just as challenging.

For example, the federal government agency oversees two different disability benefits programs: Social Security Disability Insurance (“SSDI”) and Supplemental Security Income (“SSI”).

Although both disability benefits programs require recipients to satisfy the federal government’s definition of mentally or physically “disabled”, both programs have more differences than similarities. SSDI is based on work credits, which means that in order to qualify for benefits, the disabled person must have worked the minimum number of hours and years and must have paid into the Social Security system through payroll tax deductions prior to becoming disabled. SSI on the other hand is a means based program where applicants must have extremely limited financial resources in order to qualify–work history, if any, is irrelevant.

In addition to the disability benefits programs above, the Social Security Administration is probably best known for administering the Social Security retirement benefits program.  

Like SSDI, Social Security retirement benefits are paid from a fund that is comprised of payroll tax deductions paid over the course of the worker’s life. For retirement benefits, as long as they meet the minimum qualifications, they can begin collecting benefits upon reaching the minimum retirement age. Workers who become disabled prior to retirement age and qualify for SSDI benefits will have those benefits converted to retirement benefits upon reaching the minimum retirement age.

Because proposed upcoming tax reform will likely impact income tax, disability benefits attorneys are watching closely to see what if any impact the new legislation will have on Social Security. Will income tax cuts jeopardize not only the Social Security retirement program –reportedly rumored to be exhausted by 2034 if measures aren’t taken to save it–but also “safety net” programs like Medicare and SSDI? Will proposed privatization options allowing young workers to privately invest a portion of what would be their payroll tax deduction divert needed funds from the Social Security coffer?  Will proposed cost-of-living adjustment reform hurt those living exclusively on Social Security benefits?

Will the decline in disability awards continue as a result of changes in the tax reform bill? Reportedly, “the number of disability applications and award amounts have declined for six straight years”. People are literally dying waiting for disability appeals hearings due to delays in some cases of almost 2 years.

If you or a loved one is applying for disability benefits or appealing a denial of benefits, it’s more important than ever to have a skilled disability benefits attorney on your side throughout the process. The disability attorneys of Arizona at Roeschke Law can help you. Contact us today for a free consultation.

From our offices in Tucson, Phoenix, and Tempe, we represent disabled individuals and their families throughout Arizona.