If you or a loved one have a disability, there are tax benefits you should take advantage of. These benefits will help you save and ease your tax burden. Learn how you can qualify to receive these benefits.

Disability Payments

One of the most common sources of income for people with disabilities is disability payments. Depending on the source and type, these payments may or may not be taxable.

Generally, disability payments from the government are not taxable if they are based on need or income level. For example, Supplemental Security Income (SSI) and Veterans Affairs disability benefits are not taxable. Disability payments from the government are taxable if they are based on work history or contributions. For example, Social Security Disability Insurance (SSDI) and Railroad Retirement disability benefits are taxable.

Disability payments from an employer are usually taxable if they are paid under a plan that covers all employees or a group of employees. However, disability payments from an employer are not taxable if they are paid under a plan that only covers the disabled employee, and the employee pays the premiums with after-tax dollars.

To discover if you qualify for the many types of disability payments, visit the Social Security website to learn more.

Deductions

Another way to save on taxes is to claim deductions for your eligible expenses. A deduction reduces your taxable income, which means you pay less.

Standard Deduction

The standard deduction is a fixed amount you can deduct from your income without providing any receipts or records. The standard deduction amount depends on your filing status, age, and whether you are blind. For the tax year 2022, the standard deduction amounts were:

• $12,950 for single or married filing separately
• $18,800 for the head of household
• $25,900 for married filing jointly or qualifying widow(er)

An additional standard deduction is available for disabled individuals who have blindness. The IRS determines how much you can save with this deduction each year.

Itemized Deductions

Itemized deductions are specific expenses that you can deduct from your income if you have receipts or records to prove them. A few specific itemized deductions may be relevant for people with disabilities.

• Medical and dental expenses: You can deduct the amount of your medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). Medical and dental expenses include payments for diagnosis, treatment, prevention, and cure of physical or mental impairments.
• Impairment-related work expenses: You can deduct the amount of your impairment-related work expenses that exceed 2% of your AGI. Impairment-related work expenses are expenses that you incur because of your physical or mental impairment that enable you to work.
• Casualty and theft losses: You can deduct the amount of your casualty and theft losses that exceed 10% of your AGI and $100 per event. Casualty and theft losses are losses you suffer because of a sudden, unexpected or unusual event that damages or destroys your property.

To claim itemized deductions, you must attach Schedule A (Form 1040) to your tax return. You must also keep records of your expenses and losses in case the IRS asks for them.

Credits

Another way to save on taxes is to claim credits for your eligible circumstances. A credit reduces your tax liability dollar for dollar, which means you pay less or get a refund. Unlike deductions, credits do not depend on your income level or filing status. These are a few of the most frequent credits utilized by taxpayers with disabilities.

Earned Income Credit (EIC)

This is a refundable credit for low-to-moderate-income workers who have earned income from wages, salaries, tips, or self-employment. The amount of credit you can receive depends on your income, filing status, and the number of qualifying children.

To claim the EIC, you need to use Schedule EIC (Form 1040) and attach it to your tax return. You must also meet specific requirements, such as having a valid Social Security number, being a U.S. citizen or resident alien, and not having an investment income over $3,650.

Child And Dependent Care Credit

This is a credit for expenses paid for the care of a qualifying person while you work or look for employment. A qualifying person can be your child under age 13 or your spouse or dependent who is physically or mentally incapable of self-care. The amount you can expect depends on your income and the amount of your expenses.

To claim the child and dependent care credit, you need to use Form 2441 (Form 1040) and attach it to your tax return. You also need to provide the name, address, and taxpayer identification number of the person who provided the care.

Credit For The Elderly Or The Disabled

This is a nonrefundable credit for people who are age 65 or older or who are retired on permanent and total disability. The amount of the credit depends on your income and filing status. To claim this credit, you need to use Schedule R (Form 1040) and attach it to your tax return. You also need to meet certain requirements, such as having taxable disability income if you are under the age of 65.

ABLE Accounts

Another way to save on taxes is to open an ABLE account. An ABLE account is a tax-advantaged saving account for individuals with disabilities and their families. These accounts help disabled people pay qualified disability-related expenses without affecting their eligibility for government assistance programs.

An ABLE account can help you save in taxes because earnings grow tax-free, and distributions are tax-free if used for qualifying disability expenses. In addition, contributions do not count as income for SSI or Medicaid purposes. Most importantly, some states offer tax breaks on contributions or exempt ABLE accounts from state income tax.

Conclusion

Tax benefits can help you live a more financially stable life. There are many resources available to those who have disabilities. By taking advantage of these benefits and programs, you can reduce your tax burden and start saving today.