The IHSS Income Trap: What It Means for Your Social Security

What You Need to Know: IRS vs. SSA

• The IRS says your IHSS wages are not taxable if you live with the person you care for.
• But the Social Security Administration treats that same income as earned income if you start collecting retirement benefits before your Full Retirement Age (FRA).

That means even though you’re not paying taxes on it, you could see a reduction in your Social Security benefits—at least temporarily.

Important Note:

The money isn’t lost forever. Any benefits withheld due to excess earnings may be gradually credited back to you starting the year after you reach your FRA, or once your countable income drops below the limit. It doesn’t come as a lump sum, but it will be factored into your future payments.  

2025 Earnings Limit:

• In 2025, you can earn up to $23,400 without impacting your Social Security benefits.
• If your IHSS income goes over that limit, your benefit will be reduced by $1 for every $2 you exceed it.
• In the year you reach FRA, the rules ease slightly: benefits are reduced $1 for every $3 over a higher threshold.
• Once you reach your FRA, IHSS income no longer affects your benefit.

Let's Break That Down:

Say your IHSS wages total $30,000 in 2025 and you haven’t yet reached your FRA:

• You’re $6,600 over the annual limit.
• Social Security will reduce your retirement benefits by $3,300 that year.

This surprises a lot of families—especially since the income didn’t show up on their tax return.

What You Can Do:

✔ Know your FRA and how close you are

✔ Time your Social Security filing carefully

✔ Track your IHSS wages even if they’re not taxable

✔ Work with someone who understands both special needs and retirement planning

Final Thought:

Caregivers deserve peace of mind—not just for their loved one’s future, but their own. Understanding how IHSS income interacts with Social Security is a powerful step toward protecting both.

If your benefits are reduced now, you’ll likely get some of that back later. Still, knowing the rules ahead of time helps you plan wisely and avoid surprises.

Need help making sense of it all? Let’s talk.  

*The foregoing content reflects the opinions of Van Hulzen Asset Management DBA "Van Hulzen Financial Advisors" and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.