How to Start a Business Without Losing Your Social Security

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There are three types of Social Security programs: retirement benefits, disability benefits and Supplemental Security Income. If you're planning to start a business, different steps and plans are required depending on which you're collecting. All Social Security beneficiaries should prepare a solid, formal business plan that takes into account the effect of working while receiving benefits, because your income from other sources does affect your Social Security income. Working while receiving benefits can also affect other benefits, such as Section 8 housing.

Launching your Business After Retirement

Notify the Social Security Administration that you're starting a business. The SSA will make a special determination as to whether you're actually retired based on your income each year or based on the number of hours that you work in self-employment. This determination is not required if you've reached full retirement age, which is 66 for many people but depends on the year of your birth.

Next, prepare and file your IRS tax returns, including IRS Schedule C, by the April due date each year and report your self-employment income to the SSA. Completing Schedule C will determine your self-employment tax based upon the amount of income you earned from your business. The amount of your taxable earnings on your Schedule C is not necessarily the full amount of your business earnings, because you can take deductions for business expenses. The SSA will take into account only your net income that's calculated and reported on IRS Schedule C.

How your Business Reduces your Benefits

Many people believe that launching a new business eliminates their Social Security benefits. This can happen, but it does not always happen. The SSA calculates your new monthly benefits amount by deducting $1 from your benefits for each $2 you earn over $65 until you reach full retirement age. The year you full retirement age, the SSA deducts $1 from every $3 you earn over $45,360 that year. And, of course, when you reach your full retirement age birthday, the SSA won't deduct anything from your benefits at all. These figures are accurate through 2018 but can change annually.

If you're disabled, you can deduct from your income the costs of any disability-related items or services that you pay for. As with other forms of benefits, you must report your total earnings to the SSA each year.

A business owner can lose her benefits when her business is determined to provide substantial gainful activity (SGA). An SGA is a job that:

  • Earns the business owner $1,180 per month or more or a comparable rate to what she earned prior to being disabled
  • The activity the disabled person performs in the job versus the activity an unimpaired person could perform 
  • The monetary value of the work performed. 

The $1,180 figure is for 2018. This figure may go up in the future.

Completing the Trial Work Period

If you're disabled but want to try starting a business without sacrificing your benefits, you can do so by limiting your self-employment net income to below $850 each month ($880 in 2019). If you do this, you can work without risking your benefits, as the trial work period won't be triggered. The trial work period is a period of nine months during which you can try going back to work without losing your disability benefits.

Any money you earn below these amounts won't count toward any reduction in your benefits. However, if your income goes above these amounts, the trial work period will be triggered, and every month where you make more than that minimum will count toward the trial work period. The nine months aren't consecutive; if you earn more than $850 per month in 2018 for any nine months, you've exhausted the trial work period, and you could see a benefit reduction.

Extended Period of Eligibility

Beyond the trial work period, you can earn up to an average of $1,180 each month without affecting your Social Security benefits for a 36-month "extended period of eligibility." After your trial work period and your extended period have been fully used, the SSA will make a determination as to whether you've engaged in "substantial gainful activity." This determination can result in a possible ruling that you are no longer disabled, and you may find your disability benefits terminated.

As with retirement benefits, you'll want to prepare and file your IRS tax return, including IRS Schedule C, by the April deadline each year and report your Schedule C earnings to the SSA.


  • Social Security benefits are usually reduced a percentage for each dollar you earn, but there are some exceptions. If you collect Social Security and want to start a business, you will have to report your business income to the Social Security Administration, but you may or may not see a benefit reduction.

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