Earlier this week, we detailed various income tax credits that may be relevant for people with disabilities, depending on income, marital status, and other various factors. For those who qualify, including these credits on your 2010 federal income tax return may result in a tax refund that is several thousand dollars larger.
There are also various tax deductions that apply to people who are disabled or who are receiving Social Security Disability benefits. The first, and the most straight-forward, is the increased standard tax deduction for blind or visually impaired taxpayers. The standard tax deduction is a set amount based on income, marital status, number of dependents, and various other factors. Unless a filer has major deductions, the standard credit will give more of a deduction than itemization, so this increase is a valuable financial tool for blind or visually impaired taxpayers.
Another important deduction for people with disabilities is the medical deduction. If a taxpayer chooses to itemize, he or she can deduct various medical expenses, including standard medical and dental costs, as well as insurance premiums, travel and lodging expenses incurred in obtaining medical treatment, and costs for equipment that is used by someone with a disability. One caveat to this deduction is that the amount deducted must be greater than 7.5 percent of the taxpayer's adjusted gross income.
Finally, a taxpayer who has utilized a Social Security Disability attorney or a similar representative to assist with an SSD filing or appeal, the taxpayer may be able to deduct certain fees paid to that representative for tax advice and assistance.
Source: SmartPros, "Tax Breaks for People with Disabilities Often Overlooked", 23 February 2011