The federal tax code includes many provisions that can ease the tax burden on people living with a disability. Here, the disability advocates at Disability Associates provide some helpful tax tips for those currently receiving Social Security disability income (SSDI).
See if You Qualify for Taxation
Social Security disability income (SSDI) is taxed similarly to other Social Security benefits. Under IRS Publication 915, your income from Social Security disability is not taxable if half of your SSDI plus all your other income is less than:
- $25,000 if filing single, head of household or married filing separately—and you and your spouse lived separately for the entire year
- $32,000 if you are married, filing jointly
If half of your SSDI, plus all your other income, is more than the amounts above, a portion of your benefits are taxable. The amount of SSDI taxes you will owe depends on the total amount of your benefits and other income. Usually, the higher the total amount of benefits and other income you receive, the greater the taxable portion of your benefits.
Claim Tax Credits if Eligible
Tax credits offer one of the most effective ways to lower taxes because they provide a dollar-for-dollar tax reduction or refund. Some important tax credits individuals with disabilities are commonly eligible for include:
- Earned Income Tax Credit (ETIC)
If disabled, you may also claim the EITC if you earned a limited amount of money from wages or a salary. The maximum earned income to qualify in 2017 was $15,010 for a single person with no dependent children and up to $53,930 for married, joint filers with three or more children. The IRS does not count SSDI or Supplemental Security Income toward earned income. However, benefits from employer-provided disability insurance are counted if you have not yet reached the policy’s minimum retirement age. - Spouse and Dependent Care Credit
If you pay for the care of a disabled spouse or dependent, the IRS allows a tax credit of up to 35 percent of the total medical or caregiver expenses if the child is under the age of 13. The IRS also allows the credit for the care of someone who lived with you for more than half the year, but doesn’t otherwise qualify as a dependent. For both the child and dependent care credit and the credit for the disabled you must use Form 1040 or 1040A.
Use Deductions to Reduce Taxes
If you itemize your deductions, medical costs are deductible only after they exceed 7.5 percent of your Adjusted Gross Income (AGI). Although it may seem difficult to itemize these deductions, it can often be worth it if your expenses are high due to a serious illness or injury, or your AGI is low due to being of out work for a significant amount of time.
Retain an Experienced Disability Benefits Attorney
Because SSDI is an insurance program and not a benefit for people with minimal resources, anyone who meets the program’s eligibility requirements can qualify for benefits, regardless of their income and assets. If you have questions regarding your disability benefits, or if you wish to speak to a Social Security disability advocate, contact the team at Disability Associates today for more information.