Tax Benefits for Disabled Individuals

1. Increased Standard Deduction

One of the biggest changes for people when it comes to tax benefits for disabled individuals occurs with the standard deduction. The amount of your standard deduction is determined by the amount of adjusted gross income you have, so more income means more deductions. If you have no other source of income, such as social security benefits or a pension, then your standard deduction will be higher than it would be if you were to have another source of income.

Besides that, if you or your spouse is legally blind, you can add an extra $1350 to your standard deduction and get a tax deduction benefit.

2. Exclusions from Gross Income

Income from sources other than employment or self-employment, including alimony and social security benefits, is excluded from gross income to the extent a disabled individual receives it.

If you qualify, the amount of money you can exclude from your gross income is based on a calculation using your gross income in the year you receive social security disability insurance (SSDI) benefits.

3. Impairment-related Work Expenses

A taxpayer who has been disabled for a long time and can no longer work in their regular occupation can deduct impairment-related work expenses. The expenses must be incurred because of the taxpayer's physical or mental impairment and cannot be related to another impairment. This includes medical and out-of-pocket expenses for transportation and lodging when traveling to medical appointments.

The IRS has provided some examples of what qualifies as impairment-related work expenses:

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  A qualified transportation expense (QTNE) is the amount you spend on transportation between your home, place of employment, or other work location and your doctor's office.
• A qualified medical expense (QME) is any necessary medical care due to your physical or mental condition.
• A disabled person who uses a scooter or electric wheelchair to move around the home or place of employment- so long as the cost is over $20 a month.

4. Financially Disabled

If you are disabled, you may be eligible for special tax benefits. The IRS offers a number of tax breaks that can help make your disability more manageable financially. For example, if you have limited income and resources, you may qualify for the earned income credit or the additional child tax credit. These credits reduce your taxes dollar-for-dollar.

This is because the Internal Revenue Code does not allow an individual with a physical or mental disability to suffer financially. The disabled can get substantial tax relief if they have a limited income.

5. Earned Income Tax Credit (EITC)

The earned income tax credit is a refundable credit for low-income disabled working individuals. It helps offset the tax liability of people with little or no income taxes withheld from their paychecks.

The credit is based on the number of qualifying children, your adjusted gross income, and other factors such as age and marital status. The amount of the EITC depends on how many qualifying children you have and your income level.

If you want to know more about the EITC, book a free 1-hour consultation session.

6. Child or Dependent Care Credit

This tax credit may be of particular interest to disabled individuals who have children or dependents they are supporting. The credit is worth up to 35% of your qualifying expenses, which must be for childcare or dependent care services.

To qualify, you must have been otherwise eligible for such expenses as of the end of the year immediately preceding the year in which you claim this credit. You could take a prorated amount of this credit if you paid for childcare or dependent care expenses during that tax year which totaled to less than your net income from self-employment or other sources during that year.

7. Special Medical Deductions

You may be able to claim deductions for some of your medical expenses if you have a mental or physical disability. The amount of your deduction depends on the nature of your disability and whether you have any other dependents. The following deductions are generally available:

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  The costs of utilizing the services of hospitals, nursing homes, and similar institutions.
• Costs related to maintaining a special home or vehicle used by the disabled individual.
• Costs related to maintaining a device that allows the disabled individual to perform their job.

8. Exclusion of Qualified Medicaid Waiver Payments

Medicaid waiver payments are considered to be income under federal tax law. However, a qualified Medicaid waiver payment is excluded from gross income if received by an individual deemed disabled under Social Security Administration (SSA) rules and regulations.

If you are eligible for Medicaid and receive a qualified Medicaid waiver payment, the IRS allows you to exclude this amount from your income on your federal return.

The Social Security Administration considers only one year's worth of information when determining whether someone is disabled, so if you were receiving Medicaid for that entire year, you can't count on getting your SSDI benefits retroactively.

9. ABLE Accounts

ABLE accounts are a tax-advantaged way to save for qualified disability expenses. Individuals with qualifying disabilities can contribute to an ABLE account annually, which will be matched at least dollar-for-dollar by the U.S. Treasury. The money can then be used in various ways, including to pay for tuition at an accredited post-secondary institution, or to purchase a home designed especially for wheelchair use.

If you are interested in opening an ABLE account and want to learn more about eligibility requirements, how much you can contribute, or how much the government matches your contributions, please book a free 1-hour tax consultation with the country's top-notch professionals.

Conclusion

These are various tax benefits that a disabled individual can get while living in the United States. All the tax benefits mentioned above are subjected to be availed by different disabilities. For a better understanding, please consult a Yoke Tax professional.