Social Security (SS), Supplemental Security Income (SSI), and Social Security Disability Benefits (SSDI) are crucial federal benefit programs that provide income to Americans who are unable to work. Managed by the Social Security Administration, each program serves a different purpose and has unique eligibility requirements. However, understanding how these programs impact taxes and financial aid can be confusing.
Social Security (SS) is a payroll tax mandated by FICA, funding retirement and disability benefits. The tax rate is 6.2% for employees and employers, totaling 12.4%. Medicare tax is an additional 1.45% for both parties, making the combined FICA tax rate 7.65%. Social Security benefits may be taxable depending on income and filing status.
Supplemental Security Income (SSI) is a disability income for those with low income and assets. SSI benefits are not taxed and are not reported on the FAFSA. SSI recipients must meet strict eligibility requirements based on need.
Social Security Disability Benefits (SSDI) are for disabled individuals who have paid into the Social Security program. SSDI recipients must be under 65 and have enough work credits to qualify. SSDI benefits are typically not taxable, and if they are, only the taxable amount is reported on the FAFSA.
Understanding the differences between SS, SSI, and SSDI is essential for individuals navigating these federal benefit programs. Knowing how these programs impact taxes and financial aid can help individuals make informed decisions about their financial future.