Freelancing comes with a world of benefits. You make your own schedule, there’s no limit to how much you can earn, and you don’t have to answer to anyone but yourself.
But there are also some drawbacks to being a freelance web developer. You’re in charge of doing your own taxes, you have to pay for your own insurance, and you’re responsible for finding your clients.
With freelancing, you have less security. What happens if you become disabled and are unable to work? Can you apply for benefits?
Here’s what freelancers need to know about government benefits.
You Can Apply for SSDI
If you become disabled and are unable to work, you can still apply for Social Security disability (SSDI) if:
- You’ve paid your self-employment taxes
- You’ve earned enough work credits
Just like everyone else, you’ll need to medically qualify for benefits, and you must not be performing a substantial gainful activity.
If you worked for an employer, you’d pay Social Security out of your paychecks. Because you’re self-employed, you don’t pay this money out of your paychecks. Instead, you pay Social Security when your quarterly and annual taxes.
The self-employment includes amounts for Medicare and Social Security. As long as you’ve paid your self-employment taxes and have earned some work credits, you can apply for SSDI.
Work Credits Will Determine Your SSDI Benefits
In order to be eligible for SSDI, you need to earn a certain number of work credits. The number you need will depend on your age and how many years you have worked.
As a self-employed person, you receive one credit for every $1,360 you earn in a year on which you pay Social Security taxes. Credits are based on net profits. You can only earn up to four credits per year regardless of whether you’re self-employed or employed by others.
Some Business Owners May Not be Eligible for Disability Benefits
Some business owners may not be able to apply for SSDI. If you structure you company as an S corporation, you’re not required to pay self-employment taxes. In other words, you don’t have to pay Social Security and Medicare taxes. That means you don’t earn any work credits.
As a freelancer, this exception likely won’t apply to you.
You Likely Won’t Qualify for Medicaid
Finding affordable healthcare coverage can be a challenge for freelancers. In most cases, you won’t qualify for government benefits, even if you live and work in a state that has accepted Medicaid expansion. Your income will likely disqualify you from this benefit.
Subsidies may be available if you purchase your plan through your state’s Health Insurance Exchange, but you must earn less than 400% of the poverty level in order to qualify. That equates to $47,520 for individuals and $97,200 for a family of four (as of 2016).
Some states are working on legislation to make health insurance more accessible and affordable for freelancers, but in the meantime, you’ll be stuck having to choose from a small range of high-priced plans.