According to the CDC, around 61 million adults in the U.S. are living with a disability. As a result, your medical and daily living expenses may be higher than other families. The good news is there are a number of tax breaks available 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.
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.
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 2022, these are the standard deduction amounts for most filers:
- Single or Married Filing Separately – $12,950
- Head of Household – $19,400
- Married Filing Jointly or Qualifying Surviving Spouse – $25,900
The additional standard deduction amounts for taxpayers who are 65 and older or blind are:
- Single or Head of household – $1,750
- Married taxpayers or Qualifying Surviving Spouse – $1,400
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 $10,300 for the year.
For tax year 2022, the EITC is worth:
- $560 without any qualifying children
- $3,733 with one qualifying child
- $6,164 with two qualifying children
- $6,935 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
• Artificial limbs
• Service animals
• Special phone equipment for individuals who are deaf or hard of hearing
• Qualified long-term care insurance premiums (within certain limits)
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.