Taxpayers With Disabilities Eligible For Tax Breaks

If you, your spouse, or a dependent suffer from a disability, you may be eligible for certain tax breaks, which should be taken into account when you file your 2010 return.

For example, did you know that if you are legally blind, you may be entitled to a higher standard deduction on your tax return? Also, certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.

Work-related expenses

Sometimes, a disabled person requires medication, medical equipment, or even counseling in order to work at a job. If that's the case, and can be documented, then those expenses may be deductible as non-reimbursed business expenses. If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer can tell you whether your benefit plan qualifies.

The Credit for the Elderly or Disabled is a tax credit that is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.

Elderly and disabled

You may be able to claim this credit if you were 65 or older at the end of 2010, you were under 65 at the end of 2010, and retired on permanent or total disability. You can claim the credit on Form 1040 or 1040A and figure the credit using Schedule R.

If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses. See IRS Publication 502 to see which expenses apply in your case.

Earned Income Tax Credit

Depending on your income, you may qualify for the Earned Income Tax Credit (EITC), which is available to disabled taxpayers as well as to the parents of a child with a disability. If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age.

The EITC is a tax credit that not only reduces a taxpayer's tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do -- in fact -- qualify for EITC. Additionally, if the taxpayer's child is disabled, the age limitation for the EITC is waived.

The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.

Finally, taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit. There is no age limit if the taxpayer's spouse or dependent is unable to care for themselves.

For more information on tax credits and benefits available to disabled taxpayers, see IRS Publication 907 at the IRS Website, Tax Highlights for Persons with Disabilities.