Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.
Listed below are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.
IRS Tax Tips 2011-24 issued February 3, 2011 highlights the following for disabled tax payers:
- Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.
- Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
- 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.
- Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
- Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.
- 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 you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. 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 do — in fact — 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 you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.
- Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.
And let us not forget the structured settlement, which as the result of IRC Sections 104 (and 130), affords income tax exempt periodic payments for damages paid on account of personal physical injury or physical sickness
- to those who are disabled, and parents and children of the disabled (to the extent that they have direct legal claims or claims derived from the injury to a loved one), and injured workers for workers compensation claims.
- Under IRC 5891 there is also a tax break for those who seek liquidity from their structured settlements due to unforeseen circumstances.
Helpful Links:
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IRS Publication 3966, Living and Working with Disabilities
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IRS Publication 907, Tax Highlights for Persons with Disabilities
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