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Individuals with impairments may get large tax advantages. This article divides the advantages into three categories: those that apply to a person with a disability, parents who have a handicapped child or dependant, and businesses that accommodate people with impairments.
When filing a federal tax return as a disabled person, you may be eligible for the following tax deductions, income exclusions, and credits. Some states also provide disability-related tax breaks. Contact this office for more specific information.
If you are legally blind and do not itemize your tax deductions, you may be eligible for a greater standard deduction on your return. This additional deduction is available to the taxpayer and/or their spouse (if legally blind), but not to dependents. To be eligible, a taxpayer must be blind or partly blind on the last day of the tax year. Partial blindness is described as an individual's inability to see better than 20/200 in the better eye with glasses or contact lenses, or a field of vision of less than 20 degrees. The increased standard deduction for joint filers is $1,600 per qualifying person, whereas it is $2,000 for single filers. These numbers are for 2025 and are adjusted for inflation on a yearly basis.
Certain disability payments may be exempt from taxation since they are not considered gross income. Gross income excludes Department of Veterans Affairs (VA) and Supplemental Security Income (SSI) allowances.
If you are self-employed and have a physical or mental handicap that effectively affects your capacity to work, you may be allowed to claim business expenditures for attendant care at work and other workplace-related expenses that are required for you to work. This deduction was previously available as a miscellaneous itemized deduction for workers prior to the passing of the Tax Cut and Jobs Act (TCJA), which stopped it until 2025. Congress is actively discussing tax laws for years following 2025, therefore it is unclear if these costs will be eligible as itemized deductions after 2025.
You may be eligible to claim this credit if you are 65 or older, or if you are under 65 and retired on permanent and complete disability and received taxable disability income during the tax year. To qualify, your adjusted gross income or the amount of nontaxable Social Security, pension, annuity, or disability income must fall under certain restrictions.
You must be a United States citizen or resident alien. Nonresident aliens are typically ineligible unless they marry a US citizen or resident alien and want to be classified as a resident alien. If you are married, you must file a joint return to claim the credit, unless you and your spouse lived apart for the full year. The credit for the elderly or disabled is non-refundable. This means that although it might lower your tax burden to zero, if the credit exceeds your entire tax liability, you will not get a refund. The credit goes from $3,750 to $7,500.
You may be eligible for a medical deduction. Medical expenditures may be taken as an itemized deduction on your tax return, but they must exceed a certain percentage of your adjusted gross income (AGI) to qualify. The percentage rate is 7.5% and will remain in effect until at least 2025. This implies that you may only deduct the part of your medical expenditures that exceed 7.5% of your AGI, as long as your standard deduction does not exceed your total itemized deductions.
Medical expenditures include the costs of diagnosing, curing, mitigating, treating, or preventing illness, as well as therapies that impact any portion or function of the body. Typical deductible medical costs include payments for medical and dental insurance, hospital services, physicians, dentists, prescription glasses, prescription medicines, and insulin. Premiums for Medicare B and D, as well as supplementary Medicare insurance, are also deductible. Individuals with disabilities may deduct costs such as the cost of attending a special school intended to compensate for a physical impairment, as well as nursing care salaries.
Modifications to a house to accommodate a handicap may be deemed deductible medical costs if they fulfill specific conditions. The IRS permits the whole cost of specified upgrades to be claimed as medical costs, as long as they do not raise the home's worth. Such enhancements may involve building access or exit ramps, enlarging doors, adding rails or support bars, and changing kitchen cupboards or electrical fittings. If the costs are not claimed as itemized deductions, they may be added to the home's purchase price to modify the tax basis, thereby lowering capital gains when the property is sold.
You may claim a retirement savings contribution credit for contributions made as the designated beneficiary of an Achieving a Better Life Experience (ABLE) account. To be eligible for an ABLE account, a person must be seriously handicapped before the age of 26 (46 starting in years after 2025), with a noticeable and severe functional restriction or receipt of benefits from the SSI or Disability Insurance (DI) programs.
Individuals who make qualified contributions to their ABLE account may claim the retirement savings contribution credit, often known as the Saver's Credit. This credit is nonrefundable, which means it can only lower the amount of tax owing and not raise a tax refund. Individuals may claim a maximum credit of $1,000, while joint filers can claim up to $2,000. Furthermore, the individual's adjusted gross income must not exceed particular criteria depending on their filing status, which varies between the mainland United States, Alaska, and Hawaii. Individuals who are full-time students or reported as dependents on someone else's tax return are ineligible for the benefit.
The EITC is a tax credit for those who work and have a low to moderate income. The EITC for 2025 may be up to $649 for a single person with no children who is at least 25 years old but under 65. It decreases the amount of tax owing, and the excess is refundable. Many working persons with disabilities who do not have qualifying children and fulfill the age limit are eligible for the EITC. Furthermore, to be eligible for the EITC, persons must have earned income, which might include long-term disability payments obtained prior to reaching the minimum retirement age, which is normally 55. These benefits are considered earned income if they are due to the employer's payment of disability insurance premiums. Nontaxable disability income derived from employee premiums does not qualify as earned income for EITC purposes. It's worth noting that once a person reaches the minimum retirement age, disability payments are no longer considered earned income for EITC purposes.
Many people may not submit a tax return because their income is below the filing level, resulting in them losing out on the EITC. Furthermore, there is a prevalent notion that obtaining the EITC may impair eligibility for other programs such as Social Security disability payments, Medicaid, or housing assistance, which is not true.
As the parent of a disabled kid, you may be eligible for some of the following tax breaks, deductions, and credits.
Dependents: If your kid is permanently and completely incapacitated, you may be entitled to claim them as a dependant, regardless of their age. Permanently and completely disabled:
The youngster is unable to participate in any major gainful work due to a physical or mental disability.
A doctor evaluates if the ailment has lasted or is likely to persist for at least a year or will result in death.
A dependence exemption may be available for a qualified child or relative who works and receives money in a sheltered workshop. One of the standards for becoming a dependant restricts a dependent's gross income. The maximum for 2025 is $5,200, which is increased for inflation on an annual basis. The gross income excludes money from services provided in a sheltered workshop; nonetheless, the person must still fulfill the other reliance requirements.
If you adopt a child with special needs, you may be eligible for an adoption credit and the exclusion of employer-provided adoption benefits from your income. The credit is $17,280 for 2025 and is adjusted for inflation on a yearly basis. In the event of an adoption of a special needs child, the entire credit limit will be awarded for the tax year in which the adoption is finalized, regardless of whether the taxpayer had eligible adoption costs.
The EITC is a tax credit for those who work and have a low to moderate income. The amount of the credit is determined by income and the number of qualified children. For 2025, the maximum credit is $4,328 for one kid, $7,152 for two, and $8,046 for three or more. The credit is adjusted for inflation yearly. You may be eligible for this credit if your qualified kid is permanently and fully handicapped, regardless of age, and you fulfill the other standards. Normally, to qualify for the EITC, a kid must be under the age of 19 or a full-time student under the age of 24 at the conclusion of the tax year.
Typically, to claim the child or dependent care credit, the kid must be under the age of thirteen. However, you may be eligible for this credit if, in order to be gainfully employed, you hire someone to come to your house and care for your dependant, regardless of age, if they are unable to care for themselves. People who are unable to dress, clean, or feed themselves due to physical or mental disabilities are deemed incapable of caring for themselves. Also, those who need regular supervision to avoid harming themselves or others are deemed incapable of caring for themselves. The credit is a proportion of care costs that ranges from 35% to 20% of your adjusted gross income (AGI). The 20% rate applies to AGIs above $43,000. The maximum amount of costs that may be utilized to calculate the credit is $3,000 for a single dependant and $6,000 for two or more.
As previously stated, you may deduct the medical expenditures of a handicapped person who is your dependant.
You may include medical expenditures for house improvements to accommodate a dependant, as previously specified.
If a medical conference is about a chronic condition that affects you, your spouse, or a dependant, you may include the cost of admission and transportation to the conference in your medical costs.
Businesses that desire to accommodate people with disabilities, whether they are workers or consumers, may be eligible for any of the following tax credits and deductions:
This is a tax credit for a qualified small company that pays or incurs expenditures to offer accessibility to people with disabilities. The costs must be used to help the qualified small company comply with the Americans with Disabilities Act of 1990.
Businesses may be entitled to deduct up to $15,000 in costs related to reducing physical, structural, and transportation obstacles for individuals with disabilities incurred during the tax year.
This credit incentivizes firms to recruit individuals from certain demographic groups with a very high unemployment rate or other unique job requirements, such as Supplemental Security Income (SSI) beneficiaries, Vocational Rehabilitation referrals, and disabled Veterans.
Dealing with the different disability-related tax advantages may be difficult. Please contact this office for help.