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How is unearned income counted?

Excerpted from "Social Security Handbook". See the up-to-date, official Social Security Handbook at

2607. How is unearned income counted?

Unearned income is counted at the earliest of the following points:

  • when it is received;

  • when it is credited to an individual's account; or

  • when it is set aside for his or her use.

We may count more or less of income than the individual actually receives.

Overpayment Recovery

We count more income than the individual receives where a benefit payment (such as a Social Security benefit) has been reduced to recover an overpayment. In such a situation, the individual is repaying a legal obligation through the withholding of a portion of his or her benefit amount, and the amount of this withholding is part of the individual's unearned income.

Garnishment or Debts

We also include more than the individual receives if amounts are withheld from unearned income because of a garnishment, or to pay a debt or other legal obligation, or to make any other payment such as payment of the individual's Medicare Part B, C, or D premiums.

Expenses of Obtaining Income

We count less than the individual actually receives if part of the payment is for an expense incurred to obtain the payment. For example, if money is received from an accident settlement, we subtract from the amount of the payment any medical, legal, or other expenses connected with the accident. Similarly, if the individual receives a retroactive check from a benefit program such as workers compensation, we subtract legal fees connected with the claim. We do not subtract from any taxable unearned income the amount used to pay personal income taxes. The payment of taxes is not considered an expense of obtaining income.

Retroactive Benefits

We count retroactive monthly benefits such as Social Security benefits as unearned income in the month the individual receives the retroactive benefits.

One-Time Payment

We evaluate one-time payments following normal income counting rules. Since a one-time payment is not a recurring monthly payment, we count the payment like it was received in equal payments spread over 12 months. For example, if an individual receives a one-time payment of $3,600.00, we divide the payment amount by 12 months count the one-time payment as unearned income in the amount of $300.00 per month for 12 months.

Veterans Benefits

If the individual receives a veteran's benefit that includes an amount paid because of a dependent, we do not count as unearned income the amount paid because of the dependent. However, the portion of the payment to the veteran that is attributable to the dependent is counted as the unearned income of the dependent, if the dependent resides with the veteran or receives a separate payment from the Department of Veterans Affairs.

Rental Income

We count rental income as unearned income after expenses are deducted. We use the amount of net rental income reported on your last Federal tax

Return and divide the amount by 12 months to determine your average monthly net rental income.

"Patrimony" Funds Received by Members of Religious Orders Who Have Taken a Vow of Poverty

Patrimony traditionally refers to a family inheritance. Members of religious orders often relinquish control of the patrimony to the religious order when required by the terms in his or her vow of poverty. If the member can access the funds for his or her own use, we count funds placed into the patrimony as unearned income in the month the member receives funds (e.g., the inheritance). We count only funds that the member can withdraw from the patrimony as income. We do not count any interest and dividends earned by the patrimony as income for the member. Patrimony funds are not a resource if the member has no access to the funds to pay for his or her food and shelter expenses, even if he or she retains ownership of the patrimony.

Last Revised: Apr. 18, 2006

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