There are a series of tax breaks and deductions you can claim if disabled and with this, you get to significantly reduce your income tax and even have a robust tax refund.
The following are classified as disabled:
The presence of a physical or mental disability like blindness or speech impairment that limits your employability
A mental or physical impairment that significantly reduces or limits some of your necessary life activities like walking, performing the manual task, breathing, learning, walking, etc.
The next section explores tax credit for the disabled.
Larger Standard Deductions
People that are blind legally might qualify for a higher standard deduction on their tax return. However, the deduction amount is a factor of your filing status, whether you are 65 years blind or older, or whether another taxpayer can claim an exemption on your behalf.
A few Disability Payments are not taxable.
Disability payments connected to military payments cannot be taxed. However, disability pension based on the years of service will be classified as income.
A few other payments related to disability that cannot be taxed are:
Benefit payment coming from welfare funds like payment for the blind
Worker's compensation fee for occupational injury or sickness provided it was paid with the backing of the worker's compensation act.
Damages that are paid as compensation for physical sickness or injury.
Disability benefits that were paid under a "no-fault" car insurance policy for income loss due to injuries.
Compensation due to permanent inability to use a part of the body and its associated function or permanent disfigure.
A large part of the social security disability benefits is not taxed.
Work Expenses due to Impairment
For people with any form of disability that significantly reduces their ability to be employed or cannot allow them to do one or more of their essential life activities like speaking, breathing, walking, learning, etc., such a person can deduct work expenses related to Impairment.
These expenses are targeted at care and other services related to disability at your workplace or outside your workplace, essential to your job duties. For instance, someone blind can deduct the costs associated with employing another person to read, while a lame person can deduct the cost associated with buying a wheelchair.
People who qualify for this deduction will not have their impairment-related work expenses subjected to the 7.5% of the AGI limit, which comes when people make medical expense deductions as part of the deduction for personalized items.
Credit for Disabled or Elderly
For someone with a permanent or total disability at retirement, they might qualify for a tax credit. The target of this credit is lower-income individuals, which explains why a disabled person that is single will not be eligible if the AGI is more than $417,500
Medical Expenses
Itemizing your deduction as a disabled person can make you deduct your medical expenses as an itemized deduction (personal). Eligible expenses are the out-of-pocket expenses and health insurance premiums, which are not under insurance coverage.
There is, however, a limit to this deduction to the value that the expense rises above 7.5% of the AGI during 2017 and 2018, and 10% for 2019 and beyond.
Earned Income Tax Credit
A disabled person in active employment might qualify for the earned Income tax credit provided they have low income.
ABLE Accounts
A couple of years ago, disabled individuals and their families could run a particular savings account that is tax-advantaged. This account is known as the ”Achieving a Better Life Experience” – the ABLE account. With this account, disabled folks can save money to service their expenses without affecting their eligibility for government funds.
A disabled person or the family can set up a single ABLE account, and a family member can donate up to $14,000 to the account every year. The value, however, was increased by the Tax Cuts and Jobs Act from 2018 to 2025. On getting to the $14,000 annual threshold, the disabled person can make an extra payment that is either equal or less than:
The compensation of the individual for the year
The federal poverty value for a single-person household.
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