Disabled Taxpayers Tax Benefits

There are several tax credits and benefits available to qualifying taxpayers with disabilities as well as to the parents of disabled children. Listed below are several tax credits and other benefits available if you or someone else listed on your federal tax return is disabled.

The Earned Income Tax Credit The EITC is available to disabled taxpayers as well as to the parents of a child with a disability. 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.

The Credit for the Elderly or Disabled This credit may be available to taxpayers who are age 65 or older, or who are younger than 65 and are retired on permanent and total disability.

Child or Dependent Care Credit Taxpayers who pay someone to come to their home and care for their dependent or spouse 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.

Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment, may be able to claim business expenses in connection with their workplace.

The expenses must be necessary for the taxpayer to work.

Impact on the Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.

Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income may be excluded from a taxpayer’s gross income.

For more information on tax credits and benefits available to disabled taxpayers, see Publication 3966, Living and Working with Disabilities, or Publication 907, Tax Highlights for Persons with Disabilities, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Publication 3966, Living and Working with Disabilities
Publication 907, Tax Highlights for Persons with Disabilities

Tax Help - Businesses Who Accomodate Those With Disabilities

The following article from the IRS was published in October 2007 but it is information that I feel most self-employed individuals fail to utilize when they make improvements or changes to their business to accomodate those with disabilities.

The article reads as follows:

October is National Disability Awareness month and the perfect time for the IRS to remind businesses there are tax benefits in the form of credits and deductions for businesses that accommodate individuals with disabilities.

The Disabled Access Credit provides a non-refundable credit for small businesses that incur expenditures for the purpose of providing access to persons with disabilities. An eligible small business is one that that earned $1 million or less or had no more than 30 full time employees in the previous year; they may take the credit each and every year they incur access expenditures. Refer to Form 8826, Disabled Access Credit (PDF), for information about eligible expenditures.

The Architectural Barrier Removal Tax Deduction encourages businesses of any size to remove architectural and transportation barriers to the mobility of persons with disabilities and the elderly. Businesses may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized. Businesses claim the deduction by listing it as a separate expense on their income tax return.

Also, businesses may use the Disabled Tax Credit and the architectural/transportation tax deduction together in the same tax year, if the expenses meet the requirements of both sections. To use both, the deduction is equal to the difference between the total expenditures and the amount of the credit claimed.

The Work Opportunity Credit provides eligible employers with a tax credit up to 40 percent of the first $6,000 of first-year wages of a new employee if the employee is part of a “targeted group.” An employee with a disability is one of the targeted groups for the Work Opportunity Credit, provided the appropriate government agencies have certified the employee as disabled. The credit is available to the employer once the employee has worked for at least 120 hours or 90 days. Employers claim the credit on Form 5884, Work Opportunity Credit (PDF).

For 2007, there are new Work Opportunity Credit rules for veterans with a service-related disability. The first-year wages taken into account for qualified veterans with disabilities who were hired after May 25, 2007 is increased to $12,000. See the “What’s New” section of Form 5584 for 2007.

Many businesses misclassify workers in a sheltered workshop as independent contractors when they really are employees. Revenue Ruling 65-165 discusses the treatment of such workers in each of the following categories:

Individuals in training in a rehabilitation program designed to prepare them for placement in private industry. The intent of the training, which averages 16 weeks in length, is to accustom the individual to industrial working conditions. These individuals are not employees of the workshop for Federal employment tax purposes while they are being trained.

Regular workshop employees who have completed training and are capable of performing one or more jobs in the sheltered workshop temporarily if awaiting placement in private industry or permanently if unable to compete in regular industry. These individuals are paid by the workshop that provides working conditions and pay scales comparable to those in private industry, fixes working hours and production schedules so an employment relationship is intended. The trained workers in the workshop are employees for Federal employment tax purposes

Individuals working at home that are incapable of working in the workshop that are able to produce salable articles and may sell them wherever they please. These individuals are not considered employees as no employer-employee relationship exists under the usual common law rules

Additional information about these business topics concerning accommodations for individuals with disabilities are in:

Publication 535, Business Expenses
Publication 954,Tax Incentives for Distressed Communities
Form 8826, Disabled Access Credit (PDF)
Form 5884, Work Opportunity Credit (PDF)
Form 3800, General Business Credit (PDF)
Instructions to Form 3800 (PDF)
Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit (PDF)
Instructions for Form 8850 (PDF)

There is also a wide array of tax benefits available to persons with disabilities, ranging from standard deductions and exemptions to business and itemized deductions to credits. Information about these issues is in Publication 3966, Living and Working with Disabilities (PDF).

Additional information and important links from other government agencies:

IRS.gov Disability Web site
National Disability Institute
New Freedom Initiative
Accessible IRS Tax Products
U.S. Department of Labor, Office of Disabled Employment Policy (ODEP)