Title: US Tax System Credit and Benefits Opportunities and Challenges For Persons With Disabilities, Their
1US Tax System Credit and Benefits Opportunities
and Challenges For Persons With Disabilities,
Their Families and Their Employers
- Center for Workers with Disabilities
- Asset Development Task Force Call
- February 6, 2007
2Tax Benefits and Credits Are Available to Persons
With Disabilities
- The US Tax Code Provides Numerous Tax Benefits
And Tax Credits Created For and/or That Contain
Special Provisions For Persons With Disabilities.
These Benefits And Credits Are Available To - Qualifying Taxpayers With Disabilities
- Parents Of A Child (Or Children) With A
Disability (Or Disabilities) - Employers Who Hire Employees With Disabilities
- Businesses Or Other Entities Wishing To
Accommodate People With Disabilities
3Tax Benefits and Credits Are Available to Persons
With Disabilities (continued)
- For Taxpayers With Disabilities
- Medical Expenses
- Impairment-related Work Expenses
- Credit For The Elderly Or Disabled
- For Parents Of A Child With A Disability
- Medical Expenses
- Child and Dependent Care Credit
- Earned Income Tax Credit
- For Employers And Businesses
- Disabled Access Credit
- Architectural/Transportation Tax Deduction
- Work Opportunity Credit
4Tax Benefits and Credits Are Available to Persons
With Disabilities (continued)
- Tax Benefits Also Referred To As Expenses,
Deductions And Exemptions. These Amounts
Generally (Excluding Itemized Deductions) Are
Used To Reduce A Taxpayers Taxable Income On A
Dollar-for-dollar Basis. Once A Final Taxable
Income Amount Is Determined, The Taxpayers Tax
Liability (Before Consideration Of Payments And
Tax Credits) Is Determined Based On The Taxable
Income Amount.
5Tax Benefits and Credits Are Available to Persons
With Disabilities (continued)
- Tax Credit Tax Credits Are Used To Reduce A
Taxpayers Tax Liability On A Dollar-by-dollar
Basis. Generally, Tax Credits Can Be Used To The
Extent Of An Existing Tax Liability (I.E.
Reducing Tax Liability To Zero). In Special
Situations, Including The Earned Income Tax
Credit (Fully) And The Child Tax Credit
(Partially) The Remaining Tax Credits Available
After Taxable Liability Is Brought To Zero Can Be
Refunded Directly To The Taxpayer.
6Tax Benefits and Credits Are Available to Persons
With Disabilities (continued)
- Application Of Tax Law To Your Individual Facts
And Circumstances Can Be Challenging, Please
Utilize The Resource Materials Identified At The
End Of This Presentation To Help You Determine
The Proper Application In Your Individual
Situation - Where Appropriate, Please Consult With Your Local
Volunteer Income Tax Assistance (VITA) Site Or A
Tax Professional
7Definition of Permanent and Total Disability For
Tax Purposes (in general)
- For Tax Purposes, An Individual Is Permanently
And Totally Disabled If He (She) Is Unable To
Engage In Any Substantial Gainful Activity By
Reason Of Any Medically Determinable Physical Or
Mental Impairment Which Can Be Expected To Result
In Death Or Which Has Lasted Or Can Be Expected
To Last For A Continuous Period Of Not Less Than
12 Months. - Internal Revenue Code Section 22(e)(3)
8Medical and Dental Expenses
- Medical And Dental Expenses Can Be Deducted For
The Taxpayer, Their Spouse And Their Dependents. - Medical Expenses Include Payments Made For The
Diagnosis, Cure, Mitigation, Treatment, Or
Prevention Of Disease And For Treatment Affecting
Any Part Or Function Of The Body. - Medical Expenses Include The Cost Of Equipment,
Supplies And Diagnostic Devices Needed For These
Purposes - Medical Expenses Also Include The Cost Of
Transportation For Needed Medical Care And The
Payments For Medical Insurance
9Medical and Dental Expenses (continued)
- The Following List Highlights Some Of The
Allowable Medical Expenses Related To Special
Items And Equipment Related To A Disability - Braille Books And Magazines Deduction Allowed
For Cost In Excess Of The Regular Priced Editions - Car Expenses Cost Of Special Hand Controls And
Other Special Equipment Installed In A Car For
The Use Of A Person With A Disability - Guide Dog Or Other Animal Cost And Care Of
Trained Animals Used To Assist Persons With
Disabilities - Hearing Aids And Eyeglasses Includes Cost Of
Batteries For Operation Of The Hearing Aid - Wheelchair Or Autoette Include Cost And
Maintenance Expenses In Medical Expenses When
Used Mainly For The Relief Of Sickness Or
Disability
10Medical and Dental Expenses (continued)
- The Following List Highlights Some Of The
Allowable Medical Expenses Related To Special
Items And Equipment Related To A Disability
(Continued) - Special Education Medical Expenses Can Include
Fees Paid On A Doctors Recommendation For A
Childs Tutoring By A Teacher Who Is Specially
Trained And Qualified To Work With Children Who
Have Learning Disabilities Caused By Mental Or
Physical Impairments. - Telephone Equipment Cost And Repair Of Special
Telephone Equipment That Allows A
Hearing-impaired Person Communicate Over A
Regular Telephone Line. - Television Equipment Cost Of Equipment That
Displays The Audio Part Of Television Programs As
Subtitles For Hearing-impaired Persons.
11Medical and Dental Expenses (continued)
- The Following List Highlights Some Of The
Allowable Medical Expenses Related To Special
Items And Equipment Related To A Disability
(Continued) - Capital Expenses For A Home Medical Expenses
May Include Amounts Paid For Special Equipment
Installed In A Home Or For Improvements, If Their
Main Purpose Is Medical Care For The Taxpayer,
Their Spouse Or Their Dependent And The
Improvements Do Not Add Value To The Home. If
The Improvements Do Increase The Value Of The
Home, The Deductible Amount Of The Cost Is
Reduced By The Increased Value Of The Home.
Examples Of Special Equipment Or Improvements
Are - Constructing Entrance Or Exit Ramps
- Widening Doorways Or Hallways
- Adding Handrails Or Grab Bars (Whether Or Not In
Bathrooms) - Installing Porch Lifts And Other Forms Of Lifts
12Medical and Dental Expenses (continued)
- Medical And Dental Expenses Are Claimed By
Utilizing Schedule A, Itemized Deductions - Can Deduct Only The Part Of Medical And Dental
Expenses That Are More Than 7.5 Of Adjusted
Gross Income (Adjusted Gross Income Is Total
Income Less Certain Qualified Expenses, Such As
IRA Deductions, Moving Expenses, Etc.) - Itemized Deductions Claimed On The Return Must
Be In Access Of Allowable Standard Deduction In
Order To Get The Benefit Of Claiming Medical
Expenses On Individual Tax Return (See Discussion
On Itemized Deduction Versus Standard Deduction
On Following Pages)
13Itemized Deductions versus Standard
Deductions
- Itemized Deductions Are Amounts For Certain
Expenses Used To Reduce Your Taxable Income.
Major Items Are - Medical Expenses
- Mortgage Interest And Real Estate Taxes
- Charitable Contributions
- Standard Deduction Is The Benefit That Eliminates
The Need For Many Taxpayers To Itemize Actual
Deductions - In Most Cases, Your Federal Income Tax Liability
Will Be Less If You Claim The Larger Of Your
Actual Itemized Deductions Or The Standard
Deduction
14Standard Deduction Amounts For Tax Year 2006
- Single
- 5,150
- 6,400 (Single and Blind)
- Married Filing Joint
- 10,300
- 11,300 (Married One Spouse Blind)
- 12,300 (Married Both Spouses Blind)
- Head of Household
- 7,550
- 8,800 (Head of Household and Blind)
15Standard Deduction Amounts For Tax Year 2006
(continued)
- For purposes of this deduction, you qualify is
you are totally blind or partially blind at the
end of the year. If you are partially blind, you
will need a certified statement from eye doctor
or registered optometrist stating - You cannot see better than 20/200 in your better
eye with glasses or contacts or - Your field of vision is 20 degrees or less
16Impairment-Related Work Expenses
- An Employee Who Has A Physical Or Mental
Disability That Limits Their Being Employed, Or A
Physical Or Mental Impairment That Substantially
Limits One Or More Of Their Major Life Activities
(I.E. Walking, Speaking, Breathing, Learning,
Etc.) Can Deduct Impairment-related Work Expenses - Impairment-related Work Expenses Are Ordinary And
Necessary Business Expenses For Attendant Care
Services At A Place Of Employment And Other
Expenses In Connection With The Place Of
Employment That Are Necessary To Allow A Person
With Disability To Be Able To Be Employed
17Credit For The Elderly Or Disabled
- Credit Is Potentially Available To
- Individuals Who Are Either Age 65 Or Older, Or
- Individuals Under The Age Of 65 And Retired On
Permanent And Total Disability - To Qualify For The Credit If You Are Under Age 65
- Must Be Retired On Permanent And Total Disability
- Must Have Received Taxable Disability Income
- Must Not Have Reached The Age When Your
Employers Retirement Program Would Have Required
You To Retire
18Credit For The Elderly Or The Disabled
- Definitions And Rules
- Permanent And Total Disability - Cannot Engage
In Substantial Gainful Activity Because Of Your
Physical Or Mental Condition. Requires Physician
Statement. - Substantial Gainful Activity The Performance Of
Significant Duties Over A Reasonable Period Of
Time While Working For Pay Or Profit. - Taxable Disability Income Disability Income
Must Meet Both Of The Following Requirements - Must Be Paid Under An Employers
Accident/Health/Pension Plan - Must Be Included In Income As Wages For The Time
Absent From Work Because Of Permanent And Total
Disability
19Credit For The Elderly Or The Disabled
- Credit Amount Is Computed By Utilizing Schedule R
For 1040 Returns Or Schedule 3 For 1040A Returns - Maximum Credit Amount For 2006 Is 1,125
- Determination Of Allowable Credit Amount Is
Impacted By - Income Limitations
- Nontaxable Pensions And Benefits
- Filing Status
20Child and Dependent Care Credit
- A Credit May Be Available If You Pay Qualified
Expenses To Care For One (Or More) Of The
Following Qualified Individuals That Allow You To
Work Or Look For Work - A Dependent Who Is Under The Age Of 13
- A Spouse Who Was Physically Or Mentally Not Able
To Care For Himself Or Herself - A Dependent Who Was Physically Or Mentally Not
Able To Care For Himself Or Herself (Regardless
Of Age)
21Child and Dependent Care Credit
- Tests To Claim The Credit
- The Care Must Be For One Or More Qualifying
Children - Must Keep Up A Home That You Live In With The
Qualifying Person(s) - Must Have Earned Income During The Year (In The
Case Of A Married Couple, Both Spouses Must Have
Earned Income) - Child And Dependent Care Expenses Must Be
Incurred So You Can Work Or Look For Work - Payments For Child And Dependent Care Must Be
Made To Someone You Can Not Claim As Dependent - Filing Status Can Not Be Married Filing
Separately
22Child and Dependent Care Credit
- Definitions And Rules
- Physically Or Mentally Unable To Care For Oneself
Means The Qualifying Person Cannot Dress, Clean
Or Feed Themselves Because Of Physical Or Mental
Disabilities. - Individuals Who Must Have Constant Attention/Care
To Prevent Themselves From Injuring Themselves Or
Others Are Also Considered Not Able To Care For
Themselves. - Qualified Expenses For Child And Dependent Care
Do Not Include Amounts You Pay For Food,
Clothing, Education And Entertainment. Expenses
To Attend First Grade Or Higher Grade Are Not
Expenses For Care.
23Child and Dependent Care Credit
- Claiming The Credit
- Utilize Form 2441, Child And Dependent Care
Expenses, For Form 1040 And Schedule 2 For Form
1040A - Limitations Are Placed On Eligible Work-related
Child And Dependent Care Expenses To Be Utilized
For Determining The Allowable Credit - 3,000 For One Qualifying Individual
- 6,000 For Two Or More Qualifying Individuals
- Credit Can Be As Much As 35 Of Qualified
Work-related Child And Dependent Care Expenses
For Individuals With Adjusted Gross Income Of
15,000 Or Less And Reduces To 20 For Persons
With Adjusted Gross Income Of 43,000 Or More - Maximum Credit Is 1,050 For One Qualifying
Individual And 2,100 For Two Or More Qualifying
Individuals -
24Earned Income Tax Credit
- The Earned Income Tax Credit (Or EITC) Is A Tax
Credit Available To Individuals Who Work And Have
Income Less Than 36,348 In 2006 (38,348 For
Taxpayers Married Filing Jointly) - The Earned Income Tax Credit Is A Refundable Tax
Credit! That Means If The Amount Of EITC An
Individual Is Entitled To Is Greater Than Their
Tax Liability, That Individual Would Receive A
Refund From The IRS For The EITC In Excess Of
Their Tax Liability - Example If A Taxpayer Is Entitled To An EITC Of
1,700 And Has A Tax Liability Of 500, That
Taxpayer Would Receive A Refund In The Amount Of
1,200
25Earned Income Tax Credit
- The Amount Of Earned Income Tax Credit Available
Is Dependent Upon The Amount Of Earned Income And
Whether Or Not The Individual Has A Qualifying
Child - For An Individual (Or Couple) With Two Or More
Qualifying Children, The Maximum Adjusted Gross
Income Allowed Is 36,348 (38,348 If Married
Filing Jointly) And The Maximum Allowable Credit
Is 4,536 - For An Individual (Or Couple) With One Qualifying
Child, The Maximum Adjusted Gross Income Allowed
Is 32,001 (34,001 If Married Filing Jointly)
And The Maximum Allowable Credit Is 2,747 - For An Individual (Or Couple) With No Qualifying
Child Who Are Between The Ages Of 25 And 64, The
Maximum Adjusted Gross Income Allowed Is 12,120
(14,120 If Married Filing Jointly) And The
Maximum Allowable Credit Is 412
26Earned Income Tax Credit
- Earned Income
- Most Disability Related Benefits (Including
Social Security Disability Insurance, SSI,
Military Disability Pensions And Payments From
Individually Purchased Disability Insurance
Policies) Are Not Counted As Earned Income For
Purposes Of The EITC. - Long-term, Employer-paid Disability Benefits Paid
To An Individual Under The Minimum Retirement Age
Qualifies As Earned Income For EITC Purposes,
Even If The Individual Did Not Work During The
Tax Year In Question. - Earned Income Can Be Earned By Only One Spouse To
Qualify For The EITC and Can Be Generated By
Part-time Or Full-time Employment
27Earned Income Tax Credit
- Qualifying Child
- A Child Is A Qualifying Child For EITC Purposes
If They Meet The Following Three Tests - Relationship Can Be Son, Daughter, Brother,
Sister, Descendant (I.E. Niece, Nephew, Etc.),
Foster Child, Etc. - Age At The End Of 2006, The Child Was Either
- Under The Age Of 19,
- Under The Age Of 24 And Full-time Student
- Permanently And Totally Disabled At Any Time
During 2006, Regardless Of Age - Residency Child Lived With Individual In The
United States For More Than Six Months In 2006 - Qualifying Child Does Not Have To Be Your
Dependent, Unless They Are Married - Qualifying Child Must Have A Valid Social
Security Number
28Earned Income Tax Credit
- Calculating The Available Earned Income Tax
Credit By Utilizing The EITC Worksheet For Form
1040, 1040A, Or 1040EZ - If There Is A Qualifying Child, Must Complete
Schedule EIC And Attach The Form To The Tax Return
29Earned Income Tax Credit
- Impact Of Earned Income Tax Credit On Eligibility
For Other Benefits - Federal Law Generally Excludes Counting EITC (As
Well As The Child Tax Credit (CTC)) As Additional
Income In Determining Eligibility For Other
Federal Public Benefits, Including SSI, Medicaid,
Veterans Benefits, Head Start, Etc. - EITC Refunds Are Not Considered Employment Income
And Have No Impact On Substantial Gain Activity
(SGA) Levels - For Resource Testing, Generally EITC And CTC
Refunds If Saved Are Not Counted Toward Dollar
Limits On Resources During The Month Received And
The Following Month - For SSI Purposes, EITC And CTC Refunds Are
Excluded From Resources For Nine Months Following
The Month The Refund Is Received - For Medicaid Purposes, Some States Have
Voluntarily Increased The Allowable Holding
Period For EITC Refunds
30Disabled Access Credit
- Internal Revenue Code 44 Provides For A
Nonrefundable Disabled Access Tax Credit For An
Eligible Small Business That Incurs Eligible
Access Expenditures That Provide Access To
Persons With Disabilities. - The Amount Of The Tax Credit Is Equal To 50 Of
The Eligible Access Expenditures In A Year That
Exceed 250 But Are Less Than 10,000. Thus The
Maximum Amount Of Credit Is 5,000 Per Year. - An Eligible Small Business May Take The Disabled
Access Credit Each And Every Year It Makes
Eligible Access Expenditures.
31Disabled Access Credit
- Definitions
- Eligible Small Business A Business With Either
- Gross Receipts Of 1 Million Or Less In The
Preceding Tax Year, Or - 30 Or Fewer Fulltime Employees During The
Previous Tax Year - Eligible Access Expenditures Amounts Paid Or
Incurred By An Eligible Small Business To Comply
With The Applicable Requirements Of The Americans
With Disabilities ACT (ADA)
32Disabled Access Credit
- Eligible Access Expenditures
- Include Amounts Pair Or Incurred To
- Remove Architectural, Communication, Physical Or
Transportation Barriers That Prevent A Business
From Being Accessible To, Or Usable By,
Individuals With Disabilities - Provide Qualified Readers, Taped Texts And Other
Effective Methods Of Making Materials Accessible
To People With Visual Impairments - Provide Qualified Interpreters Or Other Effective
Methods Of Making Orally Delivered Materials
Available To Individuals With Visual Impairments - Acquire Or Modify Equipment Or Devices For
Individuals With Disabilities - Provide Other Similar Services, Modifications,
Materials Or Equipment - Expenses In Conjunction With New Construction Are
Not Eligible
33Architectural/Transportation Tax Deduction
Barrier Removal Costs
- Internal Revenue Code Section 190 Created A
Special Tax Deduction To Encourage Individual And
Corporate Employers To Remove Architectural And
Transportational Barriers To The Mobility Of
Persons With Disabilities And The Elderly - All Businesses Are Eligible To Take A Tax
Deduction Of Up To 15,000 A Year For Qualified
Expenses Incurred To Remove Barriers For Persons
With Disabilities Or The Elderly - Amounts In Excess Of The 15,000 Maximum Annual
Deduction May Be Depreciated
34Architectural/Transportation Tax Deduction
Barrier Removal Costs
- Deduction Is Allowed For The Costs Of Making A
Facility Or Public Transportation Vehicle More
Accessible To And Usable By Persons With
Disabilities Or The Elderly. - Facility Is All Or Any Part Of Buildings,
Structures, Equipment, Roads, Walks, Parking Lots
Or Similar Real Or Personal Property. - Public Transportation Vehicle Is A Vehicle,
Such As A Bus Or Railroad Car, That Provides
Transportation Services To The Public (Including
Services For Your Customers, Even If Not In The
Business Of Providing Transportation Services.
35Architectural/Transportation Tax Deduction
Barrier Removal Costs
- What Expenses Are Covered?
- Barrier Removal Costs Must Meet The Guidelines
And Requirements Issued By The Architectural And
Transportation Barriers Compliance Board Under
The Americans With Disabilities Act (ADA) - Examples Of Deductible Costs
- Providing Accessible Parking Spaces, Ramps And
Curb Cuts, - Providing Telephone, Water Fountains, And
Restrooms Which Are Accessible To Persons Using
Wheelchairs, - Making Walkways At Least 48 Inches Wide
- What Expenses Are Not Covered?
- Deduction Can Not Be Used For Expenses Incurred
For New Construction, Or For A Complete
Renovation Of A Facility Or Public Transportation
Vehicle Or For The Normal Replacement Of
Depreciable Property
36Architectural/Transportation Tax Deduction
Barrier Removal Costs
- The Architectural/Transportation Tax Deduction
Under IRC Section 190 And The Disabled Access
Credit Under IRC Section 44 Maybe Used Together
In The Same Tax Year, If The Expenses Meet The
Requirements Of Both Sections. - If You Claim The Disabled Access Credit, You Must
Reduce The Amount You May Deduct Under The
Architectural Tax Deduction By The Amount Of The
Credit Claimed. - For Example, If A Business Spent 12,000 For
Qualifying Access Adaptations, It Would Qualify
For A 5,000 Disabled Access Credit And A 7,000
Architectural/Transportation Tax Deduction
37Work Opportunity Credit
- The Work Opportunity Credit Provides A Tax Credit
For Employers Who Hire Individuals That Are
Members Of Certain Targeted Low-income Groups. - Targeted Low-income Groups Include
- Vocational Rehabilitation Referral
- Qualified Supplemental Security Income (SSI)
Recipient - Qualified Recipient of Assistance under Temporary
Assistance for Needy Families (TANF) Veterans - Qualified Food-stamp Recipients
- Qualified Summer Youth Employees
38Work Opportunity Credit
- An individual is not considered a qualified
member of a targeted group unless the applicable
state employment security agency certifies them
as a member - Certification requirement can be satisfied by
- On or before the first day in which the
individual works for the employer, obtain a
certification from state employment security
agency that the individual is a member of a
targeted group, or - On or before the day employment is offered to an
individual, complete Form 8850, Pre-Screening
Notice and Certification Request for the Work
Opportunity Credit, and send it to the state
employment security agency no later than the 21st
day after the individual begins work
39Work Opportunity Credit
- The Work Opportunity Credit May Be As Much As 40
Of The Qualified First Year Wages Paid To
Qualified Individuals Prior to January 1, 2008 - Eligible Employees Must Work 400 Hours (Summer
Youth Employees Must Work At Least 120 Hours) To
Be Subject To The 40 Credit Application - Qualified First Year Wages Are Limited To 6,000
Per Employee (With A 3,000 Limitation For Summer
Youth Employees) - A Partial Credit Of 25 For Certified Employees
Who Worked At Least 120 Hours, But Less Than 400
Hours May Be Claimed By The Employer - Work Opportunity Credit Is Claimed By Employer By
Filing Form 5884, Work Opportunity Credit, With
Their Business Tax Return
40Additional Sources of Information
- Internal Revenue Service website www.irs.gov
- Individual Income Tax Information IRS
Publication 17 http//www.irs.gov/pub/irs-pdf/p1
7.pdf - Tax Guide for Small Business IRS Publication
334 - http//www.irs.gov/pub/irs-pdf/p334.pdf - Tax Highlights for Persons with Disabilities
Publication 907 http//www.irs.gov/pub/irs-pdf/p
907.pdf
41Additional Sources of Information
- Medical and Dental Expenses Publication 502
http//www.irs.gov/pub/irs-pdf/p502.pdf - Miscellaneous Deductions (including
Impairment-Related Expenses) IRS Publication
529 http//www.irs.gov/pub/irs-pdf/p529.pdf - Credit for the Elderly or Disabled IRS
Publication 524 http//www.irs.gov/pub/irs-pdf/p
524.pdf - Earned Income Tax Credit IRS Publication 596
http//www.irs.gov/pub/irs-pdf/p596.pdf - Child and Dependent Care Credit IRS Publication
503 http//www.irs.gov/pub/irs-pdf/p503.pdf
42Additional Sources of Information
- Work Opportunity Credit IRS Publication 334 -
http//www.irs.gov/pub/irs-pdf/p334.pdf - Disabled Access Credit IRS Publication 535 -
http//www.irs.gov/pub/irs-pdf/p535.pdf - Architectural/Transportation Tax Deduction
(Barrier Removal Cost) IRS Publication 535 -
http//www.irs.gov/pub/irs-pdf/p535.pdf