What to know about tax breaks for disabled individuals
Many people overlook tax credits and deductions that could help defray the costs of caring for a disabled family member. These include the medical expense deduction and the child and dependent care credit.
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It can feel overwhelming to provide the care and services a disabled family member needs. And unfortunately, many families overlook tax credits and deductions that could help defray the costs of that care. These include the medical expense deduction and the child and dependent care credit, and disabled taxpayers may take deductions for impairment-related work expenses.
The IRS authorizes deductions for medical expenses, including the costs of diagnosis, treatment and prevention of disease, insurance premiums, and transportation costs to receive care. All families who have large medical expenses should consider this deduction, not just those with a disabled member.
Individuals and families need to meet a few requirements before utilizing this deduction. You can deduct only costs that exceed 10% of your adjusted gross income. There is no maximum amount you can deduct. But you can’t deduct any costs paid for or reimbursed by insurance. And since you can’t also elect the standard deduction, you’ll want to determine which deduction most reduces your tax liability.
You can deduct medical expenses for:
- Your spouse.
- Your children, as long as they’re all under age 19, or age 24 if they’re full-time students, and as long as they aren’t filing their own returns.
- Your dependents, that is anyone who has lived with you for the entire year, doesn’t file his or her own return, and for whom you provided at least 50% of total support.
If parents are separated or divorced, both can claim the medical deduction using the expenses they paid for the child.
The scope of allowable medical expense deductions is wide. It includes part of the costs of property modifications, such as adding wheelchair ramps or elevators to your home; treatments by chiropractors and Christian Science practitioners; tuition for special schools and tutors when prescribed by physicians; diagnostic devices, such as blood sugar kits for diabetes; and purchasing and caring for service animals. If your doctor recommends a treatment or the disabled individual needs a service for daily living, it could be deductible. When in doubt, ask your tax professional.
Child and dependent care credit
This credit is designed for families who are paying someone to care for a child or dependent. It can be worth 20% to 35% of your allowable expenses, depending on your AGI, or up to $3,000 for one qualifying individual and $6,000 for two or more qualifying individuals. The expenses must be incurred to allow you and your spouse, if married filing jointly, to work or to look for work.
Families with disabled children frequently think that they don’t qualify for a child or dependent care credit because of the child’s age. But it can apply to families providing care for an individual with a total and permanent disability. However, there are limits, so you’ll want to talk to a professional to ensure your family qualifies.
Impairment-related work expense deduction
If you have a disability, you might incur expenses for services that enable you to work, such as hiring a job coach or purchasing a reader if you’re visually impaired. These may be deductible as ordinary business expenses. That means they’re deductible before they exceed 10% of your AGI, as is required for medical expenses. They’re also treated differently from miscellaneous unreimbursed employee expenses; You can claim only the portion of those that exceed 2% of your AGI.
Say you make $50,000 per year, and have purchased $3,500 worth of specialized equipment that enables you to perform your duties. You can deduct that amount because it counts as an impairment-related work expense. If it was considered a medical expense, you wouldn’t be able to claim anything less than $5,000, or 10% of AGI. And if it was classified as a miscellaneous expense, you could claim only up to $2,500, the portion exceeding 2% of your AGI.
Note that, like medical and miscellaneous expenses, you can claim only the impairment-related work expense deduction if you itemize deductions.
It’s not a perfect system, and you won’t be reimbursed for all your costs, but properly claiming tax deductions and credits can put some money back in your pocket. Track what your doctors are prescribing and your out-of-pocket expenses. Now is a good time to revisit the year’s treatments and find out how they may affect your tax bill. And be sure to work with a professional who is familiar with disabilities, or familiarize yourself with the provisions in the tax code that may help.
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