What Is Considered Disabled for Tax Purposes?

U.S. tax law uses specific criteria to define “disabled” for various tax benefits. These definitions involve medical certifications and assessments of an individual’s physical or mental condition and its impact on their ability to engage in certain activities.

Defining Disability for Tax Purposes

The Internal Revenue Service (IRS) outlines specific definitions of disability for tax purposes. One key concept is “permanent and total disability,” which applies if an individual cannot engage in any substantial gainful activity due to a physical or mental condition. A qualified physician must certify this condition as having lasted, or being expected to last, continuously for at least 12 months, or expected to result in death. Substantial gainful activity means performing significant duties for pay or profit, or work generally done for pay or profit. It does not include personal care or household maintenance.

Another condition for certain tax benefits is statutory blindness. An individual is considered statutorily blind if their central visual acuity is 20/200 or less in the better eye with a correcting lens. This also includes cases where the field of vision is limited, such that the widest diameter of the visual field subtends an angle no greater than 20 degrees.

Identifying Relevant Tax Benefits

Tax benefits are available to individuals with disabilities or those providing care for them. These include the Credit for the Elderly or the Disabled, available to those aged 65 or older, or individuals under 65 retired on permanent and total disability. This credit directly reduces tax liability.

Taxpayers may also deduct certain medical expenses, such as special equipment, home modifications for medical care, and transportation costs for medical appointments. ABLE (Achieving a Better Life Experience) accounts offer a tax-advantaged savings option for individuals with disabilities to cover qualified disability expenses. The Earned Income Tax Credit (EITC) has special rules for permanently and totally disabled individuals, potentially increasing the credit or allowing eligibility. The Child and Dependent Care Credit can be claimed if the dependent is physically or mentally incapable of self-care. An extra standard deduction is also available for individuals who are blind.

Establishing Eligibility for Benefits

Establishing eligibility for disability-related tax benefits requires appropriate documentation.

Credit for the Elderly or the Disabled

A physician’s statement certifying permanent and total disability is necessary. This statement must confirm the condition prevents substantial gainful activity and has lasted or is expected to last for at least 12 months, or result in death. While this statement does not need to be filed with the tax return, it must be kept for records, and a specific certification box on Schedule R (Form 1040) must be checked.

Medical Expense Deduction

Only the amount of qualified medical expenses exceeding 7.5% of adjusted gross income (AGI) is deductible. Qualified expenses include payments for diagnosis, treatment, or prevention of disease, or for treatments affecting any body function. This can encompass medical care, prescription medications, special equipment like wheelchairs or ramps, and certain home modifications. Impairment-related work expenses, paid to enable a disabled individual to work, can also be deductible on Schedule A (Form 1040).

ABLE Account

The individual must have been diagnosed with a qualifying disability before age 26. This can be evidenced by receiving Social Security Administration (SSA) benefits for blindness or disability, or by a physician’s certification of a comparable impairment. The physician’s certification must state the individual has a physical or mental impairment resulting in marked and severe functional limitations, and that the condition is expected to last for at least 12 continuous months or result in death.

Earned Income Tax Credit (EITC)

Disability status can affect how a child qualifies or how the credit is calculated for individuals without a qualifying child. A permanently and totally disabled child may be considered a qualifying child for the EITC even if they do not meet certain age requirements. Documentation of the child’s disability, such as medical records or a physician’s statement, should be maintained.

Child and Dependent Care Credit

The dependent must be physically or mentally incapable of self-care. This means the individual cannot dress, clean, or feed themselves, or requires constant attention to prevent injury. A physician’s statement or records from a care provider detailing the dependent’s condition and care needs are important.

Standard Deduction for Blindness

This requires a physician’s certification of visual acuity of 20/200 or less in the better eye with corrective lenses, or a visual field limited to 20 degrees or less. Taxpayers do not need to submit this certification with their return but must retain it.

Thorough medical records and physician statements should be maintained for all benefits, as these documents serve as proof of eligibility if the IRS requests verification.

Claiming Disability-Related Tax Benefits

Once eligibility for various disability-related tax benefits is established and all necessary documentation is gathered, accurately report these claims on the appropriate IRS forms.

Credit for the Elderly or the Disabled

Claimed on Schedule R (Form 1040). Taxpayers complete this schedule to determine the credit amount, which is then transferred to Form 1040.

Medical Expense Deduction

Reported on Schedule A (Form 1040), “Itemized Deductions,” if the taxpayer itemizes. Qualified medical expenses, including those related to disability, are listed here, subject to the AGI limitation. Impairment-related work expenses are also typically included on Schedule A.

ABLE Accounts

Distributions are generally tax-free if used for qualified disability expenses. Specific reporting on a tax form is typically not required unless non-qualified distributions are made.

Earned Income Tax Credit (EITC)

Disability status may influence calculations directly on Form 1040 or on Schedule EIC (Form 1040), particularly concerning qualifying child rules.

Child and Dependent Care Credit

Claimed using Form 2441, “Child and Dependent Care Expenses.” This form calculates qualifying expenses and the resulting credit, which is then entered on Form 1040.

Standard Deduction for Blindness

This additional amount is factored directly into the standard deduction calculation on Form 1040, increasing the total deduction.