A child's business loss turns the SSI student exclusion negative and gives an eligible child an allocation (20 CFR 416.1165(b)) #10558

What the model does

When a child's SSI earned income nets below zero, two formulas pass the loss into parental deeming.

• ssi_blind_or_disabled_working_student_exclusion.py lines 17-19 takes the smaller of the monthly limit and monthly earnings and sets no floor at zero, so −$3,000 of earnings gives a −$3,000 exclusion. ssi_unearned_income_deemed_from_ineligible_parent.py lines 25-31 then subtracts that exclusion from the parents' earned income, which adds $3,000 to it.
• ssi_ineligible_child_allocation.py lines 13-21 returns max_(0, allocation - income). An eligible child's allocation equals zero, so −$3,000 of income gives that child a $3,000 allocation. The deeming formula sums allocations across the tax unit (lines 37-39) and takes the total off the parents' income.

What the law says

20 CFR 416.1112(c)(3) excludes a student's earned income up to monthly and yearly limits, so a child with no earnings has nothing to exclude. 416.1165(b) deducts "an allocation for each ineligible child in the household", while an eligible child receives deemed income under paragraph (e). 416.1163(b)(2) reduces a child's allocation by the child's income and provides no increase for a loss.

Hand-computed case

A parent, 45, in Texas in 2026 has $30,000 of wages and a $6,000 private pension and reports one own child. Their child, 10, meets the disability criteria, takes up SSI, and has $1,000 of wages and a $4,000 Schedule C loss. I ran this at 035a1570, and the three formulas read the same on main.

The model raises the parents' earned income to $33,000 and cuts their unearned income to $3,000. It deems (3,000 − 240) + (33,000 − 780) / 2 − 11,928 = 6,942 and pays 11,928 − (6,942 − 240) = 5,226.

By hand, the parents keep their $30,000 of earnings and their $6,000 pension, which 20 CFR 416.1121(a) counts. The law deems (6,000 − 240) + (30,000 − 780) / 2 − 11,928 = 8,442 and pays 11,928 − (8,442 − 240) = 3,726.

Remove the pension and the two errors cancel. The $3,000 allocation spills from unearned to earned income and takes back the $3,000 the exclusion added. The model then deems (30,000 − 1,020) / 2 − 11,928 = 2,562 and pays $9,606, the same as the hand figure.

Possible fix

• Floor the exclusion at zero.
• Floor income at zero in ssi_ineligible_child_allocation.py. That gives an eligible child no allocation and stops a loss from lifting an ineligible child's allocation above the full amount.
• Deem SSI parental income from the child's co-resident parents, not the tax unit #10159 removes the subtraction from the parents' earnings but keeps reading ssi_ineligible_child_allocation, so the allocation needs its own fix.

Not covered here

How a business loss offsets a person's other earnings, which #10531 leaves open. Either way the child has no countable earnings and the parents' income stays whole, so the $3,726 holds.