Maximizing Tax Benefits and Credits for Persons With

Disabilities

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Tax Benefits and Credits

– 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

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Tax Benefits and Credits

– Tax Benefit

• Also Referred To As Expenses, Deductions And

Exemptions. These Amounts Generally (Excluding

Itemized Deductions) Are Used To Reduce A

Taxpayer’s Taxable Income On A Dollar-for-dollar

Basis. Once A Final Taxable Income Amount Is

Determined, The Taxpayer’s Tax Liability (Before

Consideration Of Payments And Tax Credits) Is

Determined Based On The Taxable Income

Amount.

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Tax Benefits and Credits

– Tax Credit

• Tax Credits Are Used To Reduce A Taxpayer’s 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.

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Tax Definition

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)

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Tax Benefits and Credits

– For Taxpayers With Disabilities• Earned Income Tax Credit• 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

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Tax Benefits and Credits

– For Employers And Businesses• Disabled Access Credit• Architectural/Transportation Tax Deduction• Work Opportunity Credit

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Earned Income Tax Credit

– The Earned Income Tax Credit (Or EITC) Is A Tax Credit Available To Individuals Who Work And Have Income Less Than $43,352 In 2010 ($48,362 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 & Has A Tax Liability Of $500, That Taxpayer Would Receive A Refund In The Amount Of $1,200

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Earned 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 Three Or More Qualifying Children, The Maximum Adjusted Gross Income Allowed Is $43,352 ($48,362 If Married Filing Jointly) And The Maximum Allowable Credit Is $5,666

•For An Individual (Or Couple) With Two or More Qualifying Children, The Maximum Adjusted Gross Income Allowed Is $40,363 ($45,373 If Married Filing Jointly) And The Maximum Allowable Credit Is $5,036

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Earned 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 One Qualifying Child, The Maximum Adjusted Gross Income Allowed Is $35,535 ($40,545 If Married Filing Jointly) And The Maximum Allowable Credit Is $3,050

• For An Individual (Or Couple) With No Qualifying Child Who Is Between The Ages Of 25 And 64, The Maximum Adjusted Gross Income Allowed Is $13,460 ($18,470 If Married Filing Jointly) And The Maximum Allowable Credit Is $457

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Earned Income Tax Credit

–Definition of 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

•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

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Earned Income Tax Credit

– Qualifying Child

•A Child Is A Qualifying Child For EITC Purposes If They Meet The Following Three Tests

– Relationship

– Age – At The End Of 2010, 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 2010, Regardless Of Age

– Residency

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Earned Income Tax Credit

–Impact Of Earned Income Tax Credit On Eligibility For Other Benefits

• For Resource Testing, New Law Now States That Any Federal Tax Refund (Including the EITC) If Saved Are Not Counted Toward Dollar Limits On Resources For 12 Months After The Refund Is Received.

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Earned Income Tax Credit

–Impact Of Earned Income Tax Credit On Eligibility For Other Benefits

•Federal Law Now Excludes Counting EITC and Any Federal Tax Refund As Income In Determining Eligibility Or The Amount of Benefit For Any Federally Funded Public Benefit Program (Includes Those Programs Partially Funded By Federal Dollars), Including SSI, Medicaid, Veteran’s Benefits, Head Start, Etc.

•EITC Refunds Are Not Considered Employment Income And Have No Impact On Substantial Gain Activity (SGA) Levels

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Earned 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

– Locate Free Tax Preparation Services In Your

Community Through IRS Programs VITA (Volunteer

Income Tax Assistance) or TCE (Tax Counseling for

the Elderly)

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Other Benefits and Credits

• Medical Expenses–Costs of diagnosis, cure, treatment or

prevention of disease; includes artificial limbs, contact lenses/glasses, hearing aids; cost & repair of special telephone equipment; cost and care of guide dog; home modifications

• Impairment Related Work Expenses–Expenses that are necessary to be able to

work; for goods/services primarily used for work

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Other Benefits and Credits

• Child and Dependent Care Credit–When an individual pays someone to care for

either a dependent or a spouse who is not able to care for themselves while they work or look for work - can claim 35% of those expense

• Credit for the Elderly and Disabled–You can claim this credit if you are 65 or older

or if you are under 65 and retired on permanent and total disability

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Other Benefits and Credits

• Business Tax Incentives–Deduction for costs of removing barriers to the

disabled and the elderly–Disabled Access Credit – nonrefundable tax

credit for small businesses that pays or incurs expenses to provide access to persons with disabilities ;

–Work Opportunity Credit – this credit provides businesses with an incentive to hire individuals with disabilities

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Additional Resources

–Internal Revenue Service website – http://www.irs.gov/

–Individual Income Tax Information – IRS Publication 17 – http://www.irs.gov/pub/irs-pdf/p17.pdf

–Tax Highlights for Persons with Disabilities – Publication 907 – http://www.irs.gov/pub/irs-pdf/p907.pdf

– Medical and Dental Expenses – Publication 502 – http://www.irs.gov/pub/irs-pdf/p502.pdf