Disabled Taxpayers may qualify for a number of tax credits and benefits. Parents of children with disabilities may also qualify. Listed below are several tax credits and other benefits that are available if you are disabled and listed on the federal tax return. This applies to any other dependent in your household who is listed on the tax return as well. Oh, and do not minimize any disability, as you may be surprised what qualifies an individual as a disabled taxpayer.
1. Increased Standard Deduction
If a tax return filer and/or spouse are legally blind, they are entitled to a higher standard deduction on their tax return.
2. Exclusions from Gross Income
Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
3. Impairment-Related Work Expenses
Employees, who have a physical or mental disability limiting their employment, may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.
4. Credit for the Elderly or Disabled
This credit is generally available to certain taxpayers who are 65 and older. It is also available to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
5. Earned Income Tax Credit
EITC is available to disabled taxpayers as well as to the parents of a child with a disability. If you retired on disability, taxable benefits that were received under your employer’s disability retirement plan are considered earned income. This is until a minimum retirement age is reached. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund.
Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65, may qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund that is received because of the EITC will not be considered income when determining whether a taxpayer is eligible for benefit programs, such as Supplemental Security Income and Medicaid.
6. Child or Dependent Care Credit
Taxpayers who pay someone to come to their home and care for their dependent or disabled spouse may be entitled to claim this credit. For children this credit is usually limited to the care expenses paid only until age 13. However, there is no age limit if the child is unable to care for him or herself.
7. Special Medical Deductions
In addition to conventional medical deductions, the tax code provides special medical deductions related to disabled taxpayers and dependents. They include:
– Impairment-Related Expenses
Amounts paid for special equipment installed in the home, or for improvements, may be included in medical expenses. However, their main purpose must be for medical care for the taxpayer, the spouse, or a dependent. The cost of permanent improvements that increase the value of the property may only be partly included as a medical expense.
– Learning Disability
Tuition fees paid to a special school for a child who has severe learning disabilities caused by mental or physical impairments. These include nervous system disorders, and can be included in medical expenses. A doctor must recommend that the child attend the school. Tutoring fees recommended by a doctor for the child’s tutoring by a teacher who is specially trained and qualified to work with children who have severe learning disabilities may also be included.
– Drug Addiction
Amounts paid by a taxpayer to maintain a dependent in a therapeutic center for drug addicts. This includes the cost of the dependent’s meals and lodging, and are considered medical expenses.
8. Exclusion Of Qualified Medicaid Waiver Payments
Payments made to care providers caring for related individuals in the provider’s home are excluded from the care provider’s income. Qualified foster care payments are amounts paid under the foster care program of a state (or political subdivision of a state or a qualified foster care placement agency). You may want to call Alex Franch, BS EA at our office, 781-849-7200 for more details regarding this waiver, as it does get complicated.
9. ABLE Accounts
Qualified ABLE programs provide the means for individuals and families to contribute and save for the purpose of supporting individuals with disabilities in maintaining their health, independence, and quality of life.
Federal law enacted in 2014 authorizes the States to establish and operate an ABLE program. ABLE is an acronym for Achieving a Better Life Experience. Under the ABLE program, an ABLE account may be set up for any eligible state resident, which would generally be the only person who could take distributions from the account. ABLE accounts are very similar in function to Sec 529 plans. However, they should not be considered as estate planning devices, as is sometimes the case with 529 plans. The main purpose of ABLE accounts is to shelter assets from means testing required by government benefit programs. Individuals can contribute to ABLE accounts subject to Gift Tax limitations. Distributions to the disabled individual are tax free if the funds are used for qualified expenses of the disabled individual. These accounts are new and must be established at the state level before taxpayers can start making contributions to them. Call Alex Franch, BS EA, at 781-849-7200 for more information. For more information, you can read the March 23, 2015 letter about the Qualified Able Program published here.
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