Do Gambling Winnings Affect Your Social Security Benefits
Posted By admin On 26/03/22
The following types of earnings income (or losses) do not countas earnings from employment or self-employment under the earningstest:
Any income from employment or self-employment earnedin or after the month the individual turns FRA;
Any income from self-employment received in a taxableyear after the year the individual becomes entitled to benefits.Such income must not be attributable to services performed afterthe first month of entitlement to benefits;
Note: This income is excluded from grossincome only for purposes of the earnings test.
Damages, attorneys' fees, interest, or penalties paid under court judgment or by compromise settlement with the employerbased on a wage claim;
Note: Any back pay recovered in a wageclaim does count for the earnings test.
Payments to secure release of an unexpired contractof employment;
Certain payments made under a plan or system established for making payments because of the employee's sickness or accident disability, medical or hospitalization expenses, or death (see §1311);
Payments from certain trust funds that are exemptfrom income tax (see §1314);
Payments from certain annuity plans that are exemptfrom income tax (see §1316);
Pensions and retirement pay;
Sick pay if paid more than six months after the monththe employee last worked;
Payments-in-kind for domestic service in the employer's private home for:
Agricultural labor;
Work not in the course of the employer's trade or business; or
The value of meals and lodging furnished under certain conditions;
Rentals from real estate that cannot be counted in earnings from self-employment. For instance, the beneficiary didnot materially participate in production work on the farm, the beneficiarywas not a real estate dealer, etc.;
Interest and dividends from stocks and bonds (unlessthey are received by a dealer in securities in the course of business);
Gain or loss from the sale of capital assets, or sale, exchange, or conversion of other property that is not stock in tradenor considered inventory;
Net operating loss carry-over resulting from self-employmentactivities;
Loans received by employees unless the employees repaythe loans by their work;
Workers' compensation and unemployment compensation benefits and strike benefits;
Veterans' training pay or allowance;
Pay for jury duty;
Payments for achievement awards, length of serviceawards, hobbies or prize winnings from contests, unless the personenters contests as a trade or business;
Tips paid to an employee that are less than $20 amonth or are not paid in cash (see §1329);
Payments by an employer that are reimbursement specificallyfor travel expenses of the employee and are so identified by theemployer at the time of payment;
Payments to an employee as reimbursement or allowancefor moving expenses, if they are not counted as wages for SocialSecurity purposes (see §1333);
Royalties received in or after the year a person turns FRA. The royalties must flow from property created by the person'sown personal efforts that he or she copyrighted or patented beforethe taxable year in which he or she turned FRA;
Note: These royalties are excluded fromgross income from self-employment only for purposes of the earningstest.
Retirement payments received by a retired partnerfrom a partnership provided certain conditions are met (see §1203);
Certain payments or series of payments paid by anemployer to an employee or an employee's dependents on or after theemployment relationship has ended due to:
Death;
Retirement for disability; or
Retirement for age.
The payments are made under a plan established by the employer(see §1319); and
Payments from Individual Retirement Accounts (IRA's)and Keogh Plans (see §1338).
The windfall elimination provision can't reduce your Social Security benefits by more than half of the amount of your pension from the job at which your earnings weren't subject to Social Security. While lottery winnings will not reduce your benefit, they are fully taxable and must be reported on your income tax return (line 21 of your 1040). Besides that, there are other potential effects.
Last Revised: Aug. 27, 2009
A common concern among those who play the lottery is what will happen to their SSI benefits if they win the jackpot. Will they still be able to collect their winnings, and will they have to give up their SSI benefits as a result of winning?
If you are on SSI and win the lottery, you must report your winnings to the SSA and lose some of your SSI benefits. This will depend on how much you won and may only be temporary. However, if you are only receiving SSDI or Social Security retirement benefits, you will not be affected.
Let’s go into further detail to get a better understanding of what will happen if you win the lottery while on SSI.
Distinguishing Between Social Security Programs
A lot of people mistakenly think that SSI and Social Security retirement benefits are the same things. Other people think that SSI and SSDI benefits are the same things. Although the Social Security Administration runs all of these programs, they are entirely different programs. This is important to understand because lottery winnings will affect retirement benefits and SSI benefits in different ways.
Doing a simple Google search for how lottery winnings will affect your SSI benefits can give you an incomplete answer. Many of the articles you will find are actually addressing Social Security retirement benefits and not SSI benefits. This might lead you to believe that your SSI benefits won’t be affected if you win the lottery or you don’t have to report your lottery winnings to the Social Security Administration, both of which are not true.
In this section, we will go through the SSI, SSDI, and retirement programs. Once you understand what kind of benefits you are getting, you will understand how winning the lottery will affect your benefits.
What Is SSI?
SSI stands for Supplemental Security Income. It is a needs-based program, and it is paid out from funds generated by general tax revenue. This means that unlike retirement benefits, which are paid out from money you put into the program yourself, SSI is not dependent on your own, previous earnings. Instead, it is dependent entirely on whether you need supplemental income to live.
Since it is based on your needs, your current income is taken into account. This is used to determine whether you need supplemental income or whether your current income is sufficient for your needs. This means that if you win the lottery and you no longer need supplemental income, your SSI benefits may be affected (more later).
SSI is given to people who have limited resources and income and who qualify. You can qualify if you are over 65 years of age, if you are disabled, or if you are blind. If you are disabled or blind, you can qualify for SSI benefits even if you are not over 65 years of age (even children can qualify for SSI benefits).
You can qualify for both retirement benefits and SSI benefits at the same time. However, if you are receiving SSI benefits, whether you are also receiving retirement benefits or not, you must report all changes to your income or living situation. This means that if you win the lottery, you will have to report that income.
What Are Social Security Retirement Benefits?
Social Security retirement benefits are usually referred to when the term “Social Security” is used. If you searched Google for information about what will happen to your SSI benefits when you win the lottery, be careful not to get your information from articles that only talk about “Social Security,” as they are usually talking about retirement benefits and not SSI benefits.
Social Security retirement benefits are not based on need but are based on your previous earnings. There is no income or resource limit, but you must have enough work credits from previous work to qualify. It is paid for not by general taxes but by Social Security taxes. These taxes are usually taken off from your wages by your employer. If you are self-employed, however, these taxes are paid for yourself.
Social Security retirement benefits are based on your average lifetime earnings. However — and this is important — other income usually does not affect your retirement benefits. This is important to remember, as we’ll be going back to this later when discussing how winning the lottery might affect your Social Security retirement benefits.
The only exception to this is the wages that you get from actual work. Such wages sometimes affect your Social Security benefits. However, lottery winnings do not fall into this category.
What Is SSDI?
Social Security Disability Insurance, or SSDI, is NOT the same thing as SSI. A lot of people mistake the two programs since their abbreviations are so similar.SSDI is a disability insurance benefit that is dependent on you having previously worked. However, unlike standard Social Security retirement benefits, SSDI benefits are only available to people under 65.
What this means is that although you can get Social Security retirement benefits and SSI benefits at the same time, you can not be getting Social Security retirement benefits and SSDI benefits at the same time. You can start receiving SSDI benefits five months after you become disabled, and you can continue to receive those benefits as long as you remain disabled.
However, once you reach the age of retirement, you will no longer be eligible for SSDI benefits, and your SSDI benefits will simply turn into standard retirement benefits.
The main difference between SSDI and SSI is that SSI is based on disability, age, and need, while SSDI is based on disability and previous earnings. The average SSDI benefit rate is actually higher than the standard federal SSI rate, but that is because SSDI benefits are dependent on previous earnings. The federal SSI benefit rate is $783, but your state may add a small supplement to that.
Do You Have to Report Lottery Winnings on SSI?
Now that we have understood what each program is, let’s move on to what will happen if you are on SSI and suddenly win the lottery. This is a question that concerns many individuals who enjoy playing the lottery for fun but are also dependent on their SSI earnings.
If you are on SSI and suddenly win the lottery, you do have to report those winnings. Remember that you must report all income while on SSI and that even includes gifts or financial assistance that is provided by family members who are living with you. According to the Social Security Administration, lottery winnings also fall into the category of income that must be reported by SSI recipients.
What Happens When Your Spouse Wins the Lottery?
What if you were not the one who won the lottery, but your spouse was? You may think that you don’t have to report those winnings since you did not win them, but according to the Social Security Administration, that is not the case. In fact, not only do you have to report lottery prizes that are won by your spouse, but you must also report lottery prizes that are won by your child.
These winnings can be reported either by you or a representative payee on your behalf.
Do Gambling Winnings Have to Be Reported?
Another common question is if SSI recipients have to report gambling winnings. The answer to this is yes, gambling prizes and winnings are treated the same as lottery winnings and must be reported. Like lottery winnings, you or a representative payee on your behalf must report gambling winnings that are won either by you, your spouse, or your child.
Do Small Winnings Have to Be Reported?
What if you only won $300? You might be worried about reporting that prize, wondering if, by doing so, you will forfeit all of your SSI benefits. Don’t worry — that won’t happen, as your SSI benefits are dependent on your needs. However, all winnings must be reported, regardless of whether you won $10,000 or only $100.
Although some money may be deducted from your SSI benefits, you will not lose all of your benefits.
The same goes for gambling winnings — it doesn’t matter how much money you won by gambling, as all winnings must be recorded.
How Soon Should You Report Your Winnings?
It is important to report your winnings as soon as possible. You should be reporting it the same month as you won the lottery. Do not delay.
Will You Lose Your Lottery Winnings if You Are on SSI?
No, you will not lose your lottery winnings if you are on SSI. In fact, as we will see in the next section, it is the other way around. If you are on SSI and win the lottery, you will be able to keep your lottery winnings. However, you may lose some of your SSI benefits.
Will You Lose Your SSI Benefits?
Yes, you may lose all or some of your SSI benefits if you win the lottery. However, remember that SSI benefits are dependent on your needs. If you only win a small amount, you are not likely to lose all of your benefits.
How Much Will You Lose?
How much of your SSI benefits you will lose will depend on how much you won.
Let’s go back to the federal standard SSI benefit, which, as we mentioned earlier, is $783. Let’s say you win $700 in a local lottery. You may only lose your SSI benefits for one month, and after that, you may be able to go back and start collecting SSI benefits again.
Let’s envision another scenario, in which you only won a few hundred dollars. In that case, your SSI benefits may be reduced for a month, but you may not lose all of it.
Let’s envision another scenario, in which you won a lottery that pays you out $7000. In that case, you may lose your SSI benefits for around ten months.
The point here is that the amount of SSI benefits that you will lose will be directly proportional to the amount that you won either by playing the lottery or by gambling. This means that in the long run, you won’t necessarily be losing any of your income.
Will You Have to File a New SSI Claim?
What if you won a large lottery prize? What happens after you use up the money? Will you be able to go back and start collecting SSI benefits again? What kind of process would that involve, and would you have to file a new claim?
If you become ineligible for SSI benefits for less than a year, you can simply go back to collecting your SSI benefits once you are eligible again. An example of that might be if you won $5,000. However, if you become ineligible for SSI benefits for over a year, you would generally have to file a new claim once you become eligible again.
Remember that to qualify for SSI benefits, you have to have assets worth no more than $2,000. If you are a couple, your combined assets must not be worth over $3,000. This can be affected by you winning the lottery.
Is It Worth Playing the Lottery on SSI?
This automatically raises the question of whether it is even worth playing the lottery if you are on SSI benefits. Yes, you won’t be losing a lot of money if you win, but you also won’t necessarily be gaining a lot of money from the lottery if you stand to lose some or all of your SSI benefits by winning. Is it really worth spending money on playing the lottery if you have nothing to gain?
However, it is important to differentiate between different kinds of lotteries. If you stand to win $700, winning the lottery probably won’t make a big difference to you, because after winning that amount, you will likely lose SSI benefits similar to that amount. However, what if you play in a lottery where you stand to win tens of thousands or even hundreds of thousands of dollars?
In that case, you probably won’t care if you lose your SSI benefits because your winnings from the lottery will make you financially secure. Therefore, if you are on SSI benefits, the best kinds of lotteries to play are those that give you the chance to win large prizes. This way, you can have fun and have something to gain at the same time.
Do Gambling Winnings Affect Your Social Security Benefits Security
The same goes for gambling. Although gambling winnings at slot machines are generally lower than large-prize lottery winnings, you can still earn a decent sum of money.
Will Lottery Winnings Affect Retirement Benefits?
Now that we know that lottery winnings will affect SSI benefits (but not the other way around), let’s see if they will affect your standard Social Security retirement benefits. This is important because many SSI recipients are, in fact, also receiving Social Security retirement benefits.
The answer is that if you are receiving Social Security retirement benefits, your benefits will not be impacted if you win the lottery. This is great news! If you are on both SSI and Social Security retirement, then although you may lose your SSI benefits, you will still be able to collect your regular Social Security benefits.
However, there are some caveats to this. Although your regular Social Security benefits will not be affected, you may have to pay higher Medicaid premiums if you win the lottery. Your lottery winnings can also affect whether you have to pay taxes on your Social Security retirement benefits or not.
If half of your Social Security benefits and other income you received (including lottery winnings), exceeds $34,000 for single filers, 85% of your income will be taxable. If you are married, then that number is $44,000. However, if half of your Social Security benefits plus any other income you receive is less than $25,000, then none of your income is taxable. You can keep all of your benefits and lottery winnings, tax-free.
It is important to remember that lottery winnings are not considered earned income concerning Social Security retirement benefits. This means that although you will have to pay federal taxes on your lottery winnings, they do not affect how much your Social Security benefits will be in the future, as those benefits are determined based solely on your past earned income.
Of course, you will be able to collect lottery winnings even if you are on Social Security retirement benefits. Being on Social Security will not affect your ability to gamble or play the lottery.
Bottom Line: If you are on both SSI and Social Security retirement benefits, then although you may lose all or some of your SSI benefits (albeit possibly only for a short time), you will still be able to keep receiving your Social Security retirement benefits. Nevertheless, you may be subject to higher Medicaid premiums and more taxation.
Do You Have to Report Winnings on Retirement?
Must lottery winnings be reported to the SSA if you are on retirement benefits?
No, you do not have to report your gambling or lottery winnings to the Social Security Administration if you are only receiving Social Security retirement benefits. However, if you are receiving SSI benefits and your Social Security retirement benefits, you must report your lottery winnings.
However, just to be clear, this does not mean that you will not have to report your winnings to the IRS. Although you will not need to report your lottery winnings to the Social Security Administration, you will still have to report them to the IRS. We already went over how winning the lottery can affect your taxation rates.
In fact, your lottery winnings will be reported to the IRS anyway, as the lottery company will end up reporting them. Once the IRS knows about them, the Social Security Administration will find out about them as well.
That is why it is good to report your lottery winnings to the SSA even if you are only receiving Social Security retirement benefits. This way, you can let them know in advance that the money is coming from lottery winnings so that no red flags are raised.
Otherwise, they may end up investigating those earnings, and it can create headaches for you in the future.
Is the Lottery Worth It on Retirement Benefits?
If you are only receiving Social Security retirement benefits, then it is definitely worth it to play the lottery as you will be able to continue receiving your benefits; however, if you are collecting both Social Security retirement benefits and SSI benefits, these changes. In that case, you will be better off playing the lottery only when you have a chance to win a lot of money — in other words, it will be more than what you would lose from not getting SSI benefits.
Will Lottery Winnings Affect SSDI Benefits?
Finally, let’s talk about SSDI benefits. Remember that these two programs are not to be confused with each other as they are entirely separate programs. SSDI benefits are dependent on your average lifetime earnings until you become disabled and go away after you become disabled (or turn into regular Social Security retirement benefits when you become of age).
Will you lose your SSDI benefits if you win the lottery? The short answer is no, you will not lose your SSDI benefits and will continue to be able to collect them even after you win a lottery windfall or win a lot of money through gambling.
Remember that SSDI benefits are not based on income limits like SSI benefits are. If you earn a certain amount of money, you will no longer be considered disabled and thus be ineligible for SSDI benefits. However, this only applies to earned income, such as income that you get from a job. If you work at a job and earn over a certain amount, you will not be considered disabled.
However, lottery winnings are not considered earned income. For that reason, you will still be able to collect your SSDI benefits, regardless of how much money you earned through playing the lottery.
Should You Report Lottery Winnings On SSDI?
As mentioned in regards to standard Social Security retirement benefits, although lottery winnings will not have an impact in that case or this case, you should report them. This way, when the SSA finds out about your winnings from the IRS, they will already know about them, and you will not have to do any further explaining.
Gambling And Social Security
Is It Worth Playing the Lottery on SSDI?
Yes. Regardless of how big or small a lottery is, it is worth playing it even if you are receiving SSDI benefits, as your winnings will have zero impact on your SSDI benefits.
What if You Receive Both SSI and SSDI?
This is not as common, but it can happen — you can be receiving SSI and SSDI benefits simultaneously. For that to happen, you will have to have been approved for SSDI benefits, but your SSDI benefits will also have to be very low.
If you have worked very little and thus have a very low average lifetime income, your SSDI benefits, which are based on how much you earned in the past, will be very low. If you become disabled as a child, you might be receiving very low SSDI benefits as well. At that point, since you have little money, you may qualify for need-based SSI benefits.
In that case, winning the lottery will affect you, as you may lose some or all of your SSI benefits. However, you will not lose your SSDI benefits and will continue to receive all of your SSDI benefits in full.
If you are receiving both SSI and SSDI benefits, you will have to report your lottery winnings to the SSA.
What Should You Do if You Win the Lottery on SSI?
If you are on SSI and win the lottery, the best thing to do is contact some professionals who can help you. Get a reliable accountant and an attorney so you can navigate the legal processes you may need to go through, and so you will be able to understand how your benefits will be affected.
Social Security Disability Gambling Winnings
Don’t rely on winning the lottery as a retirement plan; remember that it is just a fun pastime. If you win the lottery, make sure to get a financial planner to help you invest and spend your winnings responsibly.
Conclusion
If you are receiving SSI benefits, you stand to lose some or all of them after winning the lottery. Therefore, it’s best to play lotteries that give you a chance to win a lot of money. However, your SSDI and Social Security retirement benefits will not be affected by you winning the lottery. If you are receiving Social Security retirement benefits + SSI benefits or SSDI benefits + SSI benefits, only your SSI benefits will be affected while your other benefits won’t be.