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Tax credits available for the disabled, part one

As the federal income tax filing deadline approaches, there are several important considerations that apply solely to people with disabilities. In particular, Social Security Disability benefit recipients should ensure that they are taking advantage of all of the many available tax credits and deductions, and that they are paying the proper amount of taxes on benefits received.

Up to 50 percent of SSD benefits are taxable. However, there are several tax credits available to the disabled to offset taxes paid on benefits received. The first is the earned income tax credit, which is available to lower-income individuals and families, which many SSD recipients are. To qualify for the EITC for 2010, either the tax filer or his or her spouse must have been employed for at least part of the year, must have earned below a set amount (for 2010, that amount will vary between $13,460 and $48,362 depending on filing status and number of dependents) and must have investment income below $3,100.

Another available tax credit is aimed at people with disabilities. To qualify for the $7500 credit, a taxpayer must receive taxable disability income from a former employer's accident, health care or pension plan. In addition, the taxpayer's adjusted gross income must be less than $17,500 for an individual or $20,000 for a married couple filing jointly.

In addition, the spouse or other family member of a person with a disability may be eligible for the dependent care credit. Under this, a taxpayer who pays a third party to care for a family member may be able to receive a credit of 35 percent of the amounts paid to that third party.

We will continue our discussion of tax considerations for people with disabilities later this week with a look at tax deductions.

Source: SmartPros, "Tax Breaks for People with Disabilities Often Overlooked", 23 February 2011

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