This fact sheet is not meant to replace the advice of a professional tax preparer, or the advice of the Internal Revenue Service (IRS) or Massachusetts Department of Revenue (DOR). Free help with tax questions is available from your local IRS office.
The purpose of this fact sheet is to show some resources available to people with disabilities seeking legal ways to maximize their income by reducing their taxes.
What the IRS Says:
The IRS provides a publication entitled “Tax Highlights for Persons with Disabilities” (Publication 907) which discusses the tax aspects of Disability Pensions, Dependent Care Assistance Plans, Child and Dependent Care Credits, and Household Employers. These topics are reviewed briefly. Additional publications are recommended.
Publication 907 also discusses, in greater detail, itemized deductions. This is an area that is of particular interest to 2015 returns.. IRS Publications can be ordered by calling 1-800-829-3676. The following list of deductible medical expenses is from Publication 907:
- Artificial limbs, eyeglasses, and hearing aids
- The part of the cost of Braille books and magazines that is more than the cost of regular books and magazines.
- Cost and repair of special telephone equipment for hearing-impaired persons
- Cost of equipment that displays the audio part of television programs as subtitles for hearing impaired persons
- Cost and maintenance of wheelchair or autoette
- Cost and care of a guide dog or other animals aiding persons with disabilities
- Special schools, if the main reason for using the school is its resources for relieving a mental or physical disability, such as schools that teach Braille or lip reading
- Remedial language training to correct a condition caused by a birth defect
- Improvements to your home that do not increase its value if the main purpose is medical care (e.g., ramps)
- Premiums for qualified long-term care insurance up to certain amounts.
- You can deduct medical and dental expenses for you, your spouse and your dependents.
- Medical expenses include payments you make for the diagnosis, cure, mitigation, treatment, or prevention of disease or for treatment affecting any part or function of the body. They also include the cost of transportation for needed medical care and payments for medical insurance.
You can deduct only the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income (line 35, form 1040) Publication 502 Medical and Dental Expenses
Special Items and Equipment: Your medical expenses can include payments for any of the following items:
- Working with a Tax Preparer – Tax preparers that specialize in disability tax law are few and far between, so you will probably need to educate your tax preparer about your disability. You’ll need to focus on the expenses you incur as a result of the disability. Helping your preparer understand the nature of your disability and all of its associated costs will help him or her maximize deductions and ensure that you are receiving fair treatment under tax laws.
Here are some areas which you and your tax preparer should cover:
What is your income? Are you receiving disability pension payments, SSI, SSDI, lawsuit damages, payments from ‘no-fault’ auto insurance, public assistance or benefits? If so, you’ll need to examine which benefits are taxable and which are not.
What are your Itemized Deductions? Do they fairly represent the additional costs incurred as a result of your disability? Can you ‘defend’ each deduction? Don’t forget to look at special equipment, capital expenses, work expenses related to accommodating your disability-related needs, and self-employment business expenses.
Are you eligible for any Tax Credits? Examine Child and Dependent Care Credits, the Credit for the Elderly or the Disabled, and the Earned Income Credit.
Business Tax Incentives: The Disabled Access Credit and deductions should be explored if you own a business and have costs associated with removing architectural barriers.
Defending your Deductions
Many people are hesitant to be aggressive with itemized deductions for fear of being audited. However, there are steps you can take when preparing your tax return to prepare yourself for the unlikely event of an audit. As you itemize your deductions, ask yourself two questions:
Can I prove this expense?
This means keeping good records (receipts, maintenance records, etc.)
Keep these receipts with your copy of your return for future reference.
Can I prove that this expense is related to my disability?
The tax laws allow for deductions that “mitigate” disability and disease. This means that you may have to explain why a particular item is related to your disability as opposed to being a personal item. One example might be a personal computer. Was it purchased solely for use by a child with a learning disability or is it also being used by other family members? Would you have purchased a computer if there was no disability-related need? Depending on the taxpayer, all or part of such an item may be considered disability-related. Your best bet in defending such a deduction is careful documentation (e.g., a doctor’s written recommendation) of its need.
IRS publications, instructions, and even tax law are often vague and open to interpretation. Furthermore, the tax law is not always identical to IRS publications. So, if you base a decision to deduct a particular item on something you’ve read in an IRS publication, attach a copy of that publication to your copy of your records.
Tax Questions: Call the IRS at 800-829-1040. then press #1; 1-800-829-4059 (TTY/TDD)
YouTube Channel of Internal Revenue Service in American Sign Language – The YouTube channel of the Internal Revenue Service features videos produced by the IRS on various tax administration topics in American Sign Language.
IRS YouTube Video Channel – Has many videos to help with tax preparation and answer IRS related questions.
Health Insurance Coverage and Income Tax
Massachusetts Income Tax – Under the Massachusetts Healthcare Reform, all Massachusetts (MA) residents are now required to have health insurance. Those who do not will be assessed a penalty on their state income taxes. In order to avoid paying this penalty, MA residents will need to provide evidence of having health insurance. The 1099-HC form is a Massachusetts document which serves as proof of health insurance coverage for MA adult residents. Every MA resident who has insurance will receive an annual 1099-HC form which is completed and provided by your insurance carrier. You should receive a 1099-HC form in the mail by January 31st each year. If you don’t receive it by this date, please contact your insurance carrier. Frequently asked questions about health insurance and Massachusetts income tax
Federal Income Tax & Affordable Care Act for Individuals & Families – The law requires you and your dependents to have health care coverage, an exemption, or make a payment with your return. If you purchased coverage from the Health Insurance Marketplace, you may be eligible for the premium tax credit. Healthcare.gov/taxes
Taxpayer Advocate Service – An independent organization within the IRS and is your voice at the IRS. Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights as a taxpayer. If you have attempted to deal with an IRS problem unsuccessfully, try contacting your Taxpayer Advocate.
15 New Sudbury Street Room 725
Boston, MA 02203
Toll free: 877-777-4778
Fact Sheet last updated on: 2/23/2016