We’ve written before about the hurdles the $2,000 asset limit for eligibility for Supplemental Security Income (SSI) places on beneficiaries. Congress has kept this limit static since 1989 despite substantial inflation during the intervening 35 years (and many raises in their own salaries).
Some Easing of the Rules
Fortunately, some other eligibility rules have eased somewhat in the meantime. The most significant change has been the creation of ABLE accounts which allow SSI beneficiaries to manage investment accounts holding up to $100,000. But these, too, are restricted. In order to qualify, the beneficiary must have become disabled before age 26, to be changed to age 46 beginning in 2026. In addition, ABLE accounts may be funded with only $18,000 a year, adjusted with inflation to match the gift tax exclusion amount (which is otherwise relevant to very few taxpayers).
Another way that the SSI rules have been loosened over the years has had to do with the definition of “in kind” income. SSI beneficiaries must report any income they receive, which includes gifts, to the Social Security Administration (SSA), and their monthly benefits are reduced dollar-for-dollar (up to a cap for certain housing, which we’ll explain below).
For the most part, if a third party pays for items on the beneficiary’s behalf, this is not considered to be income and does not have to be reported. So, if a parent pays for a beneficiary’s education, entertainment, or travel costs, that does not have to be reported and does not affect their SSI benefit.
Food No Longer ISM
However, the rules are different if the third party pays for the beneficiary’s housing or for food. Such payments are considered to be “in-kind support and maintenance” (ISM), and must be reported to the SSA with a consequent reduction in benefits. At least on paper, this has meant that if a family went out to dinner together, the SSI beneficiary was supposed to report the cost of their meal.
As of September 30th, this will not longer be the case. The SSA has decided to no longer include food in ISM. This follows an earlier narrowing of ISM which had previously included clothing provided by someone else and no longer does.
Housing Rules Eased Too
As a result, ISM now only applies to housing provided by a third party. But here, too, the SSA is loosening the rules to some extent. As we mentioned above, the SSA limits the impact of a third party paying for housing to what they call the “Presumed Maximum Value,” which is $334.33 a month in 2024. (This is a calculated as a third of the monthly federal SSI benefit plus $20.) Thus, no matter how much the housing is worth or costs, the beneficiary’s SSI benefit will be reduced by only this amount. So, for instance, if a special needs trust pays $2,000 a month in rent for an apartment for a beneficiary, they will still only have their benefits reduced by this $334.33.
Where the new rule comes into play is when the beneficiary lives in someone else’s house. So, for instance, if an SSI beneficiary lives with their parents, they will have a $334. 33 reduction in their monthly benefit. However, this reduction does not occur if they can show that they are paying fair market rent to their parents for their living arrangement. Of course, this raises the question: How to do you establish fair market rent for a room in someone else’s house? There’s often not a clear market for such living arrangements which often has created a troublesome administrative burden for families including reductions and benefits and assessments of overpayments when the SSA and families did not agree on the market rent.
As of September 30th, families will no longer have to jump through the hoop of establishing fair market rent for shared living arrangements. If the SSI beneficiary pays that year’s Presumed Maximum Value — $334.33 a month in 2024 — as rent, that will be deemed to be the fair market rent. This is a win-win solution. The beneficiary gets their full SSI benefit; the family gets a bit of money to help defray expenses. (If they don’t want or need the funds, they may be able to channel them back into an ABLE account for the beneficiary depending on what age they became disabled.)
Of course, it would be a lot easier for everyone if the SSA got rid of ISM all together.
For more information on these and other rule changes, see this explanation by Justice in Aging.