Tax Benefits for Disabled Individuals

Disabled individuals, and also parents of disabled children, might qualify for several tax credits and other tax benefits. Listed below are a number of tax credits and other tax benefits that are offered if you or somebody listed on your federal tax return is disabled.

Increased Standard Deduction

Because a modification in the law more than 35 years ago, taxpayers (or spouses when filing a joint return) who are legally blind have been eligible for a standard deduction add-on. Hence, for 2021, if a taxpayer is filing jointly with a blind spouse, they can add an extra $1,350 to their standard deduction of $25,100; if both spouses are blind, the add-on increases to $2,700. For other filing statuses, the extra amount is $1,700. While being age 65 or older isn't a disability, it needs to be kept in mind that there is an "elderly" add-on to the standard deduction of $1,350 or $1,700, depending on filing status. These add-ons apply only to the taxpayer and spouse, not to dependents.

Exclusions from Gross Income - Tax Benefits for Disabled

Certain disability-related payments, Veterans Administration disability advantages, and Supplemental Security Income are excluded from gross income (i.e., they are not taxable). Amounts obtained for Social Security disability are handled the like regular Social Security advantages, which indicates that as much as 85% of the advantages might be taxable, depending on the amount of the recipient's (and spouse's, if filing jointly) other income.

Impairment-Related Work Expenses

Individuals with a physical or mental disability might deduct impairment-related expenditures paid to make it possible for them to work.

• Employees-- Even though the 2017 tax reform removed most miscellaneous itemized deductions, it kept the deduction for employees who have a physical or mental disability reducing their employment. Consequently, they can still deduct the expenditures needed for them to work as an itemized deduction.
• Self-employed-- For those who are self-employed, impairment-related costs are deductible on Schedule C or F.

Impairment-related work expenditures are ordinary, necessary business expenses for attendant care services at the person's workplace along with other expenditures in the workplace that are necessary for the individual to be able to work. An instance is when a blind taxpayer pays somebody to read job-related files to the taxpayer.

Financially Disabled

Under normal circumstances, one should file a claim for a tax reimbursement within 3 years of the unextended due date of the income tax return. For instance, for a 2018 income tax return, the deadline was April 15, 2019, which is when the 3-year clock began running. Hence, the IRS will not provide refunds for an amended 2018 or a late-filed original 2018 return submitted to the internal revenue service after April 15, 2022. Nevertheless, if a taxpayer is "financially disabled," the period of time for claiming a reimbursement is suspended for the period during which the person is financially disabled.

What does being financially disabled mean? A person is financially disabled if they are not able to handle their financial affairs due to a medically determinable physical or mental disability that can be expected to lead to death or that has lasted or could be expected to last for a continuous period of time of not less than 12 months.

For a joint tax return, only one spouse needs to be financially disabled for the time period to be suspended. Nevertheless, financial disability does not apply during any period when the person's spouse or any other individual is authorized to act on the person's behalf in financial matters.

Earned Income Tax Credit (EITC) - Tax Benefits for Disabled

The EITC is available to impaired taxpayers and the parents of a child with a disability, even when the child's age would normally prevent the child from being a qualifying child. To be qualified for the credit, the taxpayer needs to receive earned income, which usually indicates wages or self-employment earnings. Nevertheless, if a person has retired on disability, taxable advantages obtained under their employer's disability retirement plan are considered earned income until the person reaches a minimum retirement age.

If the disability advantages obtained are nontaxable, as would hold true if the disabled person paid the premiums for the disability insurance policy from which the benefits come, then the benefits are not considered gained earnings. The EITC is a tax credit that not simply lowers a taxpayer's tax liability but might likewise lead to a refund. Numerous working people with a disability who have no qualifying children might qualify for the EITC.

If a taxpayer's child is impaired, the qualifying child's age limit for the EITC is waived.
The EITC has no influence on certain public advantages. Any refund obtained because of the EITC will not be considered income when establishing whether a taxpayer is qualified for benefit programs like Supplemental Security Income and Medicaid.

Child or Dependent Care Credit - Tax Benefits for Disabled

Taxpayers who pay somebody to come to their home and look after their dependent or impaired spouse might be entitled to claim this credit. For children, this credit is typically limited to the care costs paid only until age 13, however there is no age limitation if the child is not able to take care of themselves.

Special Medical Deductions When Claiming Itemized Deductions

Along with conventional medical deductions, the tax code offers special medical deductions connected to disabled taxpayers and dependents. They include:

• Impairment-Related Expenditures - Amounts spent for special equipment or enhancements set up in the home might be included as medical costs deductible as component of itemized deductions, if their primary function is medical care for the taxpayer, the spouse, or a dependent. The cost of permanent enhancements that increase the value of the property might only be partially included as a medical expenditure.
• Learning Impairment - Tuition paid to a special school for a child with serious learning impairment dued to mental or physical disabilities, including nervous system conditions, may be included as medical costs qualified for the medical deduction when itemizing deductions. A medical professional needs to advise that the child go to the school. Costs for the child's tutoring advised by a doctor and offered by a teacher who is specially trained and qualified to work with children who have serious learning impairment may also be included.
• Drug Addiction - Amounts paid by a taxpayer to keep a dependent in a therapeutic center for drug addicts, including the expense of the dependent's meals and accommodations, are included as medical expenditures for itemized deduction purposes.
• Other Medical Costs - Here are a few other medical expenses that apply to people with disabilities:
  • Braille books and publications that surpasses the cost of regular printed editions.
  • Wheelchair utilized primarily for the relief of illness or disability, not just to offer transport to and from work, including the cost of operating and maintaining the wheelchair.
  • Cost and care of a guide dog or other animal assisting a person with a physical disability.
  • Synthetic limbs and hearing aids costs.

Exclusion of Qualified Medicaid Waiver Payments - Tax Benefits for handicapped

Payments made to care providers looking after related people in the provider's home are excluded from the care provider's income if they fulfill certain requirements to be considered foster care payments. Nevertheless, the nontaxable earnings might qualify as earned income for purposes of the care provider claiming the earned income tax credit. Qualified foster care payments are amounts paid under a state's foster care program (or political subdivision of a state or a qualified foster care placement agency). For more details, please call.

ABLE Accounts - Tax Benefit for Impaired

Qualified ABLE programs offer a method for people and households to contribute and save for the purpose of supporting individuals with disabilities in keeping their health, autonomy, and quality of life.

Federal law entitles states to establish and run ABLE programs. Under these programs, an ABLE account might be established for any qualified state resident-- anyone who ended up being seriously impaired before turning 26-- who would usually be the only individual who might take distributions from the account. ABLE accounts are really similar in function to Sec. 529 plans. The primary purpose of ABLE accounts is to shelter assets from the means testing required by federal government benefit programs.

People can contribute to ABLE accounts, subject to per-account gift tax limitations (maximum $16,000 for 2022, up from $15,000, which it has been for many years). For years 2018 through 2025, working people who are beneficiaries of ABLE accounts are permitted to contribute limited additional amounts to their ABLE accounts, and these contributions can be qualified for the nonrefundable saver's credit.

Distributions to the disabled individual are tax-free if the funds are used for qualified expenses of the disabled person.

For additional information on these benefits accessible to disabled taxpayers or dependents, please