A variety of tax breaks are available to help disabled taxpayers cope with the financial burdens of disability. Tax relief falls into three categories. First, many types of disability payments are exempt from taxes. Second, disabled taxpayers can deduct a number of special expenditures related to their disability. Finally, some special tax credits are available. Businesses that improve access for the disabled are also eligible for tax credits and deductions.
For businesses
For example, business owners who pay an interpreter to assist the hearing-impaired could qualify for a tax credit. The cost of services, materials, and equipment purchased to assist the visually impaired or those with other disabilities may also qualify for credit. The credit, which reduces the taxes you owe, can be as much as $5,125, and you can carry unused amounts forward to future returns. Your company is eligible if prior-year gross receipts were no more than $1 million or you employed no more than 30 full-time workers. You might also be able to take advantage of the barrier removal deduction when you make your company’s vehicles, walkways, parking lots, and other facilities user-friendly and convenient for the disabled. This deduction lets you claim up to $15,000 per year for certain modifications to business property you own or lease. The benefit: Instead of depreciating the cost of these changes, which spreads the deduction over a longer period, qualified expenses can reduce taxable income in the year you pay for them.
For individuals
On your personal return, if your spouse or dependent has a disability, you might be able to claim a dependent care credit for caregiver and other expenses you pay so you can work. In this situation, the usual under-age-13 rule for dependents does not apply. The credit can be as much as 35% of your expenditures, subject to certain restrictions. Disabled taxpayers can usually deduct some or all of the cost of home improvements made to relieve their disability. This covers items such as access ramps, wider doorways, stair lifts, or even a special air filtering system. Other tax law provisions relating to disabilities include relief from penalties for early withdrawals from retirement accounts, special adoption credit rules for eligible children, and the exclusion from income of certain disability payments.
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