People with disabilities caused by ALS are in a position to claim more deductions than the average taxpayer when filing their federal income tax returns — but these deductions aren’t conveniently identified in a single location.
A step in the right direction is the U.S. Department of Internal Revenue Service’s Publication 3966: Living and Working with Disabilities/Tax Benefits and Credits. However, the publication is kind of like mirrors within mirrors. It refers you to other publications, and sometimes those refer you to yet others. (For information on obtaining publications, see “Resources.”)
A case in point is Publication 3966’s reference to the IRS’ Publication 907 — Tax Highlights for Persons with Disabilities. In discussing possible tax deductions for medical expenses, 907 refers you, for more detailed information, to Publication 502, Medical and Dental Expenses.
Before you’re done acquiring and deciphering all relevant publications you also may have extracted a goodly portion of your hair. Below are a few tips that may save you both hair and greenbacks.
(Note: This information should not be construed as tax advice. Contact the IRS or a tax preparation expert who specializes in disabled/elderly tax questions.)
This is almost certainly your single biggest area of potential savings. In addition to medications and professional care, you may be able to deduct the cost of transportation to medical care; medically connected improvements to your home; and the cost and maintenance of a wheelchair. Health insurance premiums, nursing care and dental treatment are other possibilities, and they’re only the beginning. Download Publication 502 from the IRS Web site so you can read it at leisure.
The pesky percentage
If you itemize deductions, only the portion of your medical expenses that’s more than 7.5 percent of your adjusted gross income (as listed on tax form 1040) is deductible. That’s a particularly good reason to carefully search out and tally up all your applicable medical expenses, or to plan ahead so allowable expenses (especially large ones such as a wheelchair purchase or home modifications) can be grouped in a particular year.
This one is explained more fully in Publication 503: Child and Dependent Care Expenses. Two examples: If you provided care for more than half the year to a spouse, you may be able to exclude from your income up to $5,000. You may also be able to deduct care for a “qualifying” child. Check out Publication 501: Exemptions, Standard Deduction, and Filing Information for definitions of “qualifying.” Age restrictions apply in some cases, but not for a child of any age who is permanently and totally disabled, and who lived with you for more than half the year.
On Social Security?
If Social Security Disability Income (SSDI) is your only source of income, none of it is taxable. Similarly, Supplemental Security Income payments aren’t taxable.
Good news for vets
No benefits you receive from the Veterans Administration — including disability, education and grants for homes designed for wheelchair living — need to be counted as income. See Publication 525 (Taxable and Nontaxable Income) for more details.
Impairment-related work expenses
If you’re still working (even at home), you may be able to deduct the cost of attendant care at your workplace, plus other expenses necessary for you to work, such as speech recognition programs, adapted keyboards, special telephone equipment, etc. Some have had success deducting the cost of attendant care needed to get ready for their workday, arguing that they can’t work without it. These expenses are not subject to the cap imposed on normal work-related expenses. Check Publication 529, Miscellaneous Deductions.
Earned income credit
This tax credit, designed to benefit low-income families, is for qualified people who work and have earned income less than an annual amount determined by the IRS. The EIC requirements are complicated, but Publication 596, Earned Income Credit, spells them out.
Credit for the Elderly or Disabled is the title of IRS Publication 524. Although qualifications for the credit are rather restrictive, they often apply to people with ALS. If you’re under age 65, you must have retired on permanent and total disability; have received taxable disability income; and not reached the mandatory retirement age established by your former employer.
Especially if you’re expecting a refund on your taxes, filing your return electronically is the only way to go. You could get your refund in a matter of days, rather than weeks or months. And if you made $54,000 or less in 2007, you can file online at no cost. Visit the IRS site and select the Free File link.
Editor’s Note: This issue went to press before the IRS finalized all tax information for 2007. Double-check form names, numbers and content for any last-minute changes.
The Internal Revenue Service’s Web site, www.irs.gov, contains a wealth of information. You can search for current publications by topic or keyword; download tax forms (including Form 1040), publications and instructions; research your tax questions; and electronically file your return.
If you don’t have Internet access or prefer to speak to a living person at IRS, you can order forms, publications and instructions by calling toll-free (800) 829-3676. To ask questions about your particular tax situation, call (800) 829-1040. If you use TTY/TDD equipment, call (800) 829-4059 to both order forms and ask questions.
The IRS Web site also contains contact information for IRS offices in your state.
Several types of programs that provide tax return preparation help are available at no cost. Publication 910, Guide to Free Tax Services, contains a list of such tax assistance and education programs.