Think Carefully Before Giving Gift Cards to an SSI Recipient

The holidays are here and most families are busy shopping for gifts for their loved ones. According to the National Retail Federation, gift cards are once again expected to be the most popular gift given because they are easy to buy and they take the guesswork out of shopping.

Unfortunately, although you may be in the holiday spirit when buying a gift card for your loved one, the Social Security Administration (SSA), which runs the Supplemental Security Income (SSI) program, is most certainly not. Under SSI regulations, any dollar of unearned income received by an SSI beneficiary will reduce his SSI benefit by one dollar. This means that if an SSI recipient with a $500-a-month benefit receives $500 in unearned income during the course of one month (the number is actually a little higher due to a monthly income offset), he will lose his SSI benefit, and, quite possibly, the Medicaid coverage that often accompanies it. To make matters even more complicated, the SSA defines unearned income as “any item an individual receives in cash or in-kind that can be used to meet his or her need for food or shelter.”

Under current SSI regulations, any gift card that can be used to purchase food or shelter, or that can be resold, counts as income for purposes of SSI. Furthermore, if a beneficiary does not spend the entire card in the month in which she receives it, the remaining balance of the card will count as the recipient’s resource in the following months, which can result in a termination of benefits if the card pushes the recipient over the $2,000 SSI resource limit. For example, let’s assume that Mary receives a $500 monthly SSI benefit and her mother gives her a $100 gift card for Christmas. If the card can be used to purchase food, then Mary’s SSI benefit will drop to $400 for the month in which she received the card. Furthermore, if Mary does not use the gift card during that first month, it will count against her $2,000 resource limit in the next month, and for any additional months that it remains unspent. So if Mary had $1,950 in the bank and the gift card is added to that money, she will be over the resource limit and will lose her SSI benefits. The same thing would happen if Mary received a cash gift instead of a gift card.

The easiest way to avoid this problem is to not give an SSI recipient a gift card at all. However, gift cards that cannot be used to purchase food or shelter and that cannot be resold are okay. Because the SSA assumes that the card can be resold, you must be diligent in determining the store’s exchange/refund policy for gift cards. It also pays to investigate what a store sells before buying the card, because seemingly innocent department stores may also sell food. If possible, it is much better to give an SSI beneficiary an actual physical gift, like a sweater or a book, and if the SSI recipient is the beneficiary of a third-party special needs trust, you can even give cash to the trust instead of giving it to the SSI recipient himself. (There is a complicated and very small exception to the gift-giving rules that you can learn about here – it may save $60 of income every three months.)

The holidays are a time for families to get together and giving gifts during this season are a way for many families to express their love for one another. Gift giving should not be a source of stress for anyone, especially an SSI recipient. If you have any questions about the best gifts to give and their effect on an SSI recipient, speak to your qualified special needs planner first.