You are entitled to an array of tax deduction and credits if you are disabled. This may result in the IRS sending you money and eliminate your income tax liability.
If you have the following then you are disabled:
For the disabled, major tax benefits include:
1. Larger Standard Deduction?
If you are legally blind, you may take advantage of the higher standard deduction on your tax return. The standard deduction amount depends on whether you are 65 or older or blind, whether an exemption can be claimed for you by another taxpayer, and it depends on your filing status.
2. Nontaxable Disability Payments
There is no taxes in military service-connected disability payments. However, in most cases, you must include it in your income if you receive a disability pension based on your years of service.
Other not taxable disability-related payments include:
See IRS Publication 525, Taxable and Nontaxable Income. Also, the disability benefits of an individual from Social Security are not taxed.
3. Expenses On Impairment-Related Work
You can deduct your impairment-related work expenses if you have a physical or mental disability that limits your ability to be employed, or substantially limits one or more of your major life activities. These are expenses that are not only needed for you to do your work but also for the care and other disability-related services at your place of work or outside of your workplace. For example, a deaf person could deduct the cost of sign language interpreter used during work meetings and a blind person could deduct the cost of employing a reader for work.
The 7.5% of adjusted gross income limit is not applicable to your impairment-related work expenses. The AGI limit applies when medical expenses are being deducted as a personal itemized deduction if you do qualify for this deduction.
4. Credit for the Disabled or Elderly
When you retired and you were totally and permanently disabled, then you may be entitled to a tax credit. A single disabled person, for example, will not qualify if his or her adjusted gross income exceeds &17,500 since this credit is for lower income individuals only. See IRS Publication 524, Credit for the Elderly or Disabled for more information on this credit.
5. Medical Expenses
Medical expenses can be deducted as a personal itemized deduction by disabled individuals provided that they itemize their deductions. Any expenses not covered by insurance and health insurance premiums such as out-of-pocket expenses are eligible expenses. However, the amount that such expenses exceed 7.5% of adjusted gross income is the limit to this deduction during 2017 and 2019 while during 2019 and later, it’s 10% of AGI.
6. Earned Income Tax Credit
Earned income tax credit can be qualified by disabled individuals who work but have low incomes.
7. ABLE Accounts
The ABLE Account (named for the Achieving a Better Life Experience) is a special tax-advantaged saving account that has been established in 2015 by the disabled individuals and their families. Without jeopardizing their eligibility to receive government assistance, disabled people are given the ability to save money to help pay for their expenses by the account. A single ABLE account can be established by disabled individuals or their families and each year, family and friends may contribute a total of $14,000 into the account. The total amount that may be contributed to the ABLE account during 2018 through 2025 was raised by The Tax Cuts and Job Act. The disabled individual may make an additional contribution after the $14,000 annual limit is reached as long as it is equal to the lesser of:
