Tax Benefits for People with Disabilities

The information in this article is up to date for tax year 2023 (returns filed in 2024).

According to the CDC, around 61 million adults in the U.S. are living with a disability. If you’re one of them, your medical and daily living expenses may be higher than other families. The good news is there are a number of tax benefits for people with disabilities.

How does the IRS define disabled?

You are considered to be permanently and totally disabled if your mental or physical condition prevents you from being able to work. A physician must certify that your condition is expected to last for a long period (at least 12 months) or can lead to death.

Tax credit for the elderly and disabled

If you are at least 65 years old and/or permanently and totally disabled, you may qualify for the tax credit for the Elderly or Disabled. The credit ranges between $3,750 and $7,500 and is based on your adjusted gross income and Social Security benefits.

ABLE Accounts can help you save for disability-related expenses

Between medical bills and other impairment-related expenses, living with a disability can get expensive. To minimize the burden, Congress created Achieving a Better Life Experience (ABLE) accounts to help people with disabilities and their families save for disability-related expenses. These tax-favored accounts are for individuals who became disabled before their 26th birthday.

You can contribute up to $17,000 for 2023 and the distributions are tax free as long as they are used for qualified disability expenses.

Qualified disability expenses are expenses for supplies or services related to supporting the health, independence, or quality of life of the disabled person.

These can include expenses related to

• Education
• Housing
• Transportation
• Assistive technology
• Support devices
• Healthcare

The IRS or Social Security Administration may monitor an ABLE account to ensure the funds are used towards qualified expenses.

You get a higher standard deduction for blindness

Taxpayers who are blind can claim a bigger standard deduction, which translates into a larger tax break. You are considered legally blind if:

• You can’t see better than 20/200 in your best eye with glasses or contact lenses.
• Your field of vision is 20 degrees or less.

For tax year 2023 (taxes filed in 2024), these are the standard deduction amounts for most filers:

• Single or Married Filing Separately – $13,850
• Head of Household – $20,800
• Married Filing Jointly or Qualifying Surviving Spouse – $27,700

The additional standard deduction amounts for taxpayers who are 65 and older or blind are:

• Single or Head of household – $1,850
• Married taxpayers or Qualifying Surviving Spouse – $1,500

You may be eligible for the Earned Income Tax Credit

Certain disability payments qualify as earned income, even if you didn’t work during the year. For example, disability retirement benefits you receive before you reach retirement age or employer-paid disability insurance benefits. This can help you qualify for the Earned Income Tax Credit (EITC).

The EITC is a refundable tax credit for workers with low to moderate incomes. The credit amount varies based on your filing status, qualifying children and income. To qualify, your earned income and adjusted gross income must fall below the following income limits.

Your investment income also cannot exceed $11,000 for the year.

For tax year 2023, the EITC is worth:

• $600 without any qualifying children
• $3,995 with one qualifying child
• $6,604 with two qualifying children
• $7,430 with three or more kids

Please note, Social Security Disability Insurance, Supplemental Security Income (SSI) and military disability pensions do not count as earned income. If you still haven’t filed your taxes, it’s not too late to prepare your return at ezTaxReturn. We’ll find any credits you’re eligible for, so you get the biggest possible refund.

You may qualify for the Child and Dependent Care Credit

If you pay a care provider to look after a loved one while you go to work, you can claim the Child and Dependent Care Credit on your tax return.

In order to qualify, the individual must be mentally or physically unable to care for themselves. The maximum expense limit is $3,000 for the care of one qualified person and $6,000 for two or more qualified people. The child and dependent care credit is worth 20 to 35 percent of your expenses depending on your adjusted gross income.

Medical expenses are deductible

Another important tax tip for people with disabilities is that you can deduct any medical expenses that exceed 7.5 percent of your adjusted gross income if you itemize.

The following medical aids along with any maintenance fees qualify:

• Hearing aids
• Eyeglasses/contacts
• Artificial limbs
• Wheelchairs
• Service animals
• Special phone equipment for individuals who are deaf or hard of hearing
• Qualified long-term care insurance premiums (within certain limits)

Additionally, you can deduct the cost of home improvements made to improve your home’s accessibility, such as ramps, widened doorways, and even new door knobs. Claim these deductions as part of the medical expense deduction.

For a full list of tax-deductible medical expenses for people with disabilities, see IRS Publication 502.

Impairment-related work expenses are deductible

Having a mental or physical disability can severely limit your ability to work. If you need the help of impairment-related services to do your job, you can deduct the cost on your federal tax return. For example, a deaf person who hires a sign language interpreter for work meetings can claim those expenses.

You can claim disability-related work expenses under miscellaneous itemized deductions.

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The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.