Tips for Tax Filers with Disabilities
Because my son has a disability and works, he also must file a tax return. Last year I helped him file his returns for the first time. We began by using the IRS Free File option for people earning less than $60,000. By selecting the “Help me find Free File software” I was able to find a “name-brand” software that we used to auto-file his Federal return and his state return. Although we did not use them, I discovered that the Internal Revenue Service (IRS) also provides accessible tax forms and offers free tax preparation assistance for those individuals with disabilities who do need them.
In addition to getting federal and state refunds, by using this software, I found out my son was eligible for education credits for his college expenses and the Earned Income Tax Credit (EITC) because he was a low wage earner. This year, I did more research to figure out how to make the most of all available tax credits and deductions. Here is some information I found about other credits and deductions to investigate if you or a dependent has a disability.
Tax credits reduce the amount of tax you owe. The ones I list here are not limited to people with disabilities, but may be applicable.
Earned Income Tax Credit (EITC) is a credit for wage earners with a limited amount of income— below $13,350 for a single taxpayer and up to $49,078 for married filing jointly with three or more children. For EITC, the wage earner can receive eligible credit in addition to a tax refund.
American Opportunity Tax Credit (AOTC) is a credit for qualified education expenses paid for a student enrolled at least half-time for the first four years of higher education leading to a degree. You can get a maximum annual credit of $2,500 per eligible student. If the credit brings the amount of tax you owe to zero, you can have 40 percent of any remaining amount of the credit (up to $1,000) refunded to you.
Lifetime Learning Credit is a credit of up to $2,000/year for qualified education expenses for one or more postsecondary education courses or courses to acquire or improve job skills. Unlike the AOTC, the student does not need to be enrolled in a program leading to a degree or other recognized education credential.
Dependent Care Credit is a credit of up to $3,000 for one dependent or $6,000 for two or more dependents who are incapable of self-care or require full-time attention. The wage earner can receive a credit for a percentage of payments made to a qualified caregiver who is needed so the wage earner can work.
Tax deductions reduce the amount of earnings that are taxable. Here are three that may be useful for people with disabilities.
Medical and Dental Expenses can be deducted if those expenses were at least 10% of your adjusted gross income, even if you did not have a health savings account last year. Some eligible expenses that were surprising to me were:
- braille books and subscriptions;
- capital expenses for installing equipment or expenses to accommodate a home for a disability;
- disabled dependent care expenses;
- insurance premiums;
- special home for a person with a developmental or intellectual disability;
- long term care;
- personal and attendant care;
- medical conference concerning the chronic illness of self or dependent;
- employment taxes to a person providing in home care or household services related to a medical condition; and
- special education school or services.
Impairment-Related Work Expenses that are necessary for a person with disability to be able to work can be deducted. A person who is self-employed can also claim these expenses. Your impairment-related work expenses are not subject to the 2% of adjusted gross income limit that applies to other employee business expenses.
Medicaid Waiver Payments to individual care providers caring for someone who lives with them may be able to exclude those payments from their income.
One of the most frustrating things I found when searching for disability credits on the IRS site and other information sites was not being able to find everything in one place. However, I did find two publications that were very informative. They do not include everything I have mentioned here, but you may find more tax information that applies to your situation in "Living and Working with Disabilities" or in IRS Publication 907. I’m definitely not an accountant – just a mom who likes to share what she’s learned with others. Let us know, at New Editions, if this has been useful to you. Happy filing!
Cherie Takemoto is a Project Manager at New Editions. She brings over 20 years of experience managing disability advocacy and information resource programs related to transition, instructional technology, and cultural competency.