Tax Benefits for Persons with Disabilities

Their is a significant amount of extra hardship and expenses associated with having a disability. Because of this the IRS offers tax credits and benefits for persons with disabilities. Here is a list to determine which ones could apply to you:

  • Deduction for Persons who are Legally Blind. In order to qualify for this credit a person must not be able to see, in neither eye, better than 20/200 even with the use of glasses and/or contacts. You may also qualify if your field of vision is less than 20 degrees. It is given to those who are blind because of the increased amount of assistance that may be needed. This standard deduction amounts to $1100 if you do not itemize your deductions. No additional standard deduction may be taken for any other disability when this deduction is used. The deduction is taken in line 39a of the 1040 form.

  •  No Tax on Disability Payments. Workers compensation payments for work related injuries are tax free. Payments for non work-related injuries are not exempt. Long-term-disability insurance payments offered by the employer may be tax free if the employee has paid the premiums. Depending on the other income Social Security benefits payments may be only 50% - 85% taxable. Social Security Income (SSI) payments are tax free.

  • Expenses Used to Work. If your disability limits your employment you may claim any expenses used to make it possible for you to work as business expenses (transportation, nursing services, etc.). These cost are fully deductible.

  • Medical expenses. If you itemize your deductions you may be able to deduct medical expenses not covered by health insurance if they exceeded 7.5 % of adjusted gross income (AGI). Any additions or modifications made to your home for medical reasons or to accommodate your disability can be deducted as a medical expense.

  • Educational Expenses. The cost of tuition, room and board for any private schooling used to provide assistance needed for children with physical and/or mental disabilities can be deducted as a medical expense.

  • Dependent Care Credit. Taxpayers who have someone care for a disabled person while the primary caregiver works or looks for work may be able to claim this credit. No age limit applies if the person is unable to care for themselves.

  • Earned Income Tax Credit (EITC). This credit can be used by persons with or without children. If you have children, this credit may continue to be used after the child has turned 18 since no age limit is imposed on children with disabilities, as long as the other qualifications are met. Any refund from this credit will not disqualify you or the child from receiving other benefits. If you do not have children,  between the ages of 25 and 65 and you receive disability retirement benefits and other earned income the benefits are considered earned income until you reach the minimum retirement age so this credit may be used.

Tax preparation is offered to taxpayers with disabilities  and income less than $49,000 under the Volunteer Income Tax Assistance (VITA) Program. The program consist of IRS trained accounting students and is available nationwide. (1-800-906-9887)

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities or Publication 907, Tax Highlights for Persons with Disabilities, available on the IRS website at http://www.irs.gov or by calling 800-TAX-FORM (800-829-3676).