Tax Benefits for the Disabled

I’ve been getting a lot of questions from disabled taxpayers about whether any special tax breaks exist for them in 2009. The answer is yes – and no.

As I stated in a prior post, there was some economic relief for disabled Americans in 2009 in the form of the Economic Recovery Payment (ERP) – but it was not through the IRS. It was in the form of additional checks mailed out by the Social Security Administration, Railroad Retirement Board and the Veterans Administration. If you were eligible for a check, it will not affect your 2009 tax return unless you are also working and claiming the Making Work Pay Credit. You cannot apply for a missed ERP check through the IRS – contact the agency directly.

That said, taxpayers with disabilities may qualify for other tax breaks in 2009; unlike ERP, you can take advantage of these benefits by filing a tax return. They include:

Increased Standard Deduction. If you are totally or partly blind on December 31, 2008, and you do not itemize deductions, you are entitled to a higher standard deduction of an additional $1,100. If you are partly blind, you must get a certified statement from an eye doctor or registered optometrist that you cannot see better than 20/200 in the better eye with glasses or contact lenses or your field of vision is not more than 20 degrees. If your vision will not get better, that statement should be included.

Credit for the Elderly or Disabled. If you are over age 65 or under 65 on permanent and total disability, you may be eligible for an additional credit. You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. A physician must certify that the condition has lasted or can be expected to last continuously for a year or more, or that the condition can be expected to result in death. Income limits apply. To take the credit, you’ll need to complete f1040sr.pdfSchedule R (downloads as a pdf). If you want the IRS to figure the credit for you, attach Schedule R and check the appropriate box.

Medical Expenses. If you itemize your deductions, you may be able to deduct medical expenses. The expenses must be at least 7.5% of your AGI in order to qualify – and then you can only deduct expenses over that amount.

Dependent Care Credit. If you pay someone to take care for your dependent or spouse, you may be entitled to claim this credit. There is no applicable age limit if your dependent or spouse is unable to take care of themselves. To figure the credit, complete federal form 2441 (downloads as a pdf).

Taxpayers should also keep in mind that certain disability-related payments such as Veterans Administration disability benefits and Supplemental Security Income are not taxable for federal income tax purposes.

If all of this is a bit overwhelming – or if you think you might qualify for other credits, such as the EITC (earned income tax credit) – there is free help available.

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6 thoughts on “Tax Benefits for the Disabled

  1. Kelly,

    Good Post.

    I believe there is also an exclusion for taxpayers under age 59 ½ from the 10% premature distribution penalty from an IRA if you are disabled. The distribution is still taxable, just no penalty is assessed.


    Tom Scanlon, CPA, CFP®

  2. Charles,
    If you’re itemizing, the associated costs would be deductible.
    If you’re not, you may qualify for the higher standard deduction. You’ll need to get a statement from your doctor that you cannot see better than 20/200 in the better eye with glasses or contact lenses, or your field of vision is not more than 20 degrees and is not likely to improve. There’s more information in Pub 17 but your best bet is to check with your tax preparer.

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