top of page

Tax Relief for Individuals with Disabilities.

Medical Deductions; ABLE Accounts; Disabled Spouse or Dependent Care Credit

  • Home alterations

  • Special education

  • Healthcare Services

  • Work-related costs connected to impairment

People with disabilities and parents of disabled children are liable for a variety of income tax

breaks. Some of these tax benefits are explained in this article.

ABLE Accounts - Under federal law, states are permitted to provide specifically designed, tax- favoured ABLE accounts to persons with disabilities. Qualified ABLE program helps individuals and families to contribute and save to help those who become blind or seriously crippled before the age of 26 retain their health, independence, and quality of life.

The ABLE programmers, which are permitted under federal tax law, are managed by the states. A state with an ABLE account programmer may give its citizens the chance to open one of these accounts or enter into a partnership with another state that also provides ABLE accounts. An ABLE account can receive contributions up to the annual gift tax exclusion threshold, which is currently $16,000, and dividends are tax-free if used to cover eligible disability expenses.

The beneficiary of the ABLE account (i.e., the handicapped person) is permitted to make a

maximum extra contribution each year up to 2025 that is equal to the lower of:

  • The beneficiary's annual taxable pay, or

  • The current year's inflation-adjusted poverty level, which means that if a recipient of an ABLE programmer in 2022 contributes up to $12,880 based on the 2021 poverty levels for a one-person family. Hawaii citizens pay $14,820, and residents of Alaska pay $16,090, respectively.

Therefore, if indeed the beneficiary's employer makes a contribution to a qualifying retirement plan on their behalf, the additional contribution is not permitted.

The beneficiary's extra contribution is eligible for the non-refundable saver's tax credit, which

can be as much as 50% of the first $2,000 donated, up to a maximum credit of $1,000,

depending on the beneficiary's actual income.

Disabled Spouse or Dependent Care Credit

Tax credits are offered to those who pay for childcare for kids who are less than 13 at the time the care is delivered. A dependent of any age who is physically or mentally unable to care for themselves and resided with the taxpayer for more than half of the year is also eligible for this benefit. This dependent may be the taxpayers spouse or another dependent. This is also valid for those who would have been considered dependents except for the fact that they filed a joint return with their spouse or earned $4,400 or more in 2022.

Low-income taxpayers earn from the larger percentage of the credit, which varies from 20% to 35 taxpayer%, whereas with an adjusted gross income of $43,000 or more only receive 20% of the credit. The credit's maximum allowable care costs are $3,000 for one qualified individual and $6,000 for two or more. Be aware that the credit rate and permitted care costs were much greater and the credit was refundable for 2021 only.

Medical Expense Deductions

People with disabilities may have additional special deductible medical expenses in addition to the 'regular' medical expenses. To be eligible for a tax benefit, a taxpayer must itemize their deductions on Schedule A and have medical costs that amount more than 7.5 percent of their AGI. Expenses that qualify include:

  • Hearing aids - Including the expenses and repair of specialized telephone equipment for those who are deaf or hard of hearing

  • Prosthetics

  • Vision Aids - Contact lenses and eyeglasses

  • Wheelchair - Costs and maintenance

  • Service Dog - The price and upkeep of a service dog or guide dog. According to the IRS, "if the taxpayer can establish that the taxpayer is using the service animal primarily for medical care to alleviate a mental defect or illness and that the taxpayer would not have paid the expenses but for the disease or illness, the taxpayer may be able to claim the costs of purchasing, training, and maintaining a service animal to assist an individual with mental disabilities as medical care".

  • Transportation - Adaptations made to vehicles or specific equipment fitted to accommodate a handicap

  • Capital costs related to impairment - If the major objective of the money spent on modifications or special equipment put in the home is to provide medical treatment for the taxpayer, the spouse, or a dependent, the cost of those items may be deducted as medical expenditures. A portion of the expenditures of long-term upgrades that raise a property's value may be deducted as a medical expense. The rise in the property's value lowers the costs of the improvement. The distinction is a medical cost.

The full cost of the improvement is counted as a medical expense if it does not raise the value of the property. Certain house modifications performed to suit a taxpayer's disability, or that of their spouse or dependents who reside with them, often do not enhance the value of the home; thus, the expenditures can be fully deducted as medical expenses. Construction of entry or exit ramps for the house, expansion of entrance and exit entrances, corridors, and internal doorways, the installation of railings, support bars, or other modifications, and the addition of handrails or grab bars are a few instances of full-cost

medical costs.

  • Learning Disability - Medical expenditures may be deducted for tuition paid to a special school for a kid who has severe learning challenges brought on by mental or physical impairments, including nervous system problems. A physician must endorse the child's enrollment in the school. If the tutoring is suggested by a doctor, costs for tutoring from a teacher who is properly trained and equipped to work with children who have severe learning impairments may also be covered.

  • Special Schooling - Medical treatment covers the costs of attending a special school created to make up for or overcome a physical impairment so the student is eligible for a future in a regular classroom or for a normal life. This includes a facility that teaches lip reading or braille. The main benefit of attending the school must be its unique amenities for easing the student's disability. Included in the definition of medical expenditures are the costs of food and accommodation given by the school, as well as the tuition for regular education incidental to the specific services offered at the institution.

  • Nursing Services - Nursing services can be included as medical costs if wages and other payments are made. If the services are of a type that nurses typically conduct, a nurse is not required to perform them. For example, administering medicine, changing bandages, bathing and grooming the patient are all services related to treating the patient's condition. These services may be offered at home or in a different type of care facility. In most cases, just the cost of nursing care qualifies as a medical expense. These funds must be split between the time spent providing nursing services and the time spent completing personal and domestic tasks if the attendant also offers these services.

  • Impairment-related Work Expenses - An employed person with a physical or mental disability may deduct expenses for attendant care at their place of employment or for other costs associated with their place of employment that enable them to work. If they itemize their deductions, individuals with a physical or mental impairment that prevents them from working or significantly restricts one or more major life activities—such as performing manual tasks, walking, speaking, breathing, learning, and working—are eligible to deduct their impairment-related work expenses. These costs are not classified as medical expenditures; rather, they are claimed as a miscellaneous itemized deduction on Schedule A.

13 views0 comments


bottom of page