Although the Internal Revenue Service considers nearly all money a taxpayer receives as taxable income, a child’s Supplemental Security Income is one of the exceptions to that rule. SSI payments, to either adults or children, aren’t taxable, and aren’t reported when a child calculates her adjusted gross income for the year. Other Social Security benefits she receives may be taxed, however.
Supplemental Security Income
To be eligible for SSI, a child must be under the age of 18 or under the age of 22 if he’s still a student, and be either legally blind or disabled. The child must suffer from a severe physical or mental disability that’s expected to last at least at least a year or end in the child’s death. The child must meet income requirements – and in many cases, his parents and stepparents must meet the requirements through a process known as "deeming" – to qualify for SSI benefits as well.
If your child meets the requirements to receive SSI, the amount she receives depends on how much you and other supporting guardians earn each month. The maximum monthly benefit for a single SSI recipient is $698, although that amount may be reduced by the amount of "countable" income – wages, investment income and other means of support – that remains after living expenses such as food, lodging and health care are deducted from a family’s monthly income.
SSI and AGI
The IRS specifically excludes Supplemental Security Income payments from taxation, and children who qualify for these benefits aren’t taxed on them. Because SSI income is partially need-based, the IRS doesn’t require recipients to report the income. While you don’t report SSI income when you submit a child’s Form 1040, you must list all other types of Social Security benefits as income, including survivor benefits and any additional disability payments the child receives.
Custodial Parents' Taxes
In most cases a custodial parent or guardian receives a check for a child’s benefits from Social Security. While this check is made out in the name of the custodial adult, the income is nonetheless paid to the child. Because of this, you don’t report your child’s Social Security benefits on your return, even when the check comes in your name. Custodial parents must keep track of their child’s taxable benefits – of which SSI isn’t included – and report those on a return made in the child’s name.
- Social Security Administration: Tax Requirements for Supplemental Security Income (SSI) Benefits
- IRS: Publication 907 - Tax Highlights for Persons with Disabilities
- Social Security Administration: Understanding Supplemental Security Income SSI for Children
- Social Security Administration: SSI Federal Payment Amounts for 2012
- Social Security Administration: Countable Income for SSI Program
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