Steven Mendelsohn

The tax law includes many provisions that put a little money into the wallets of ordinary people. All of these are as important to people with disabilities as to anyone else, but some have provisions that allow people with disabilities even greater flexibility.

The Earned Income Tax Credit (Internal Revenue Code Sec. 32)--

Working people with earned income of up to about $31,000 in 2004 (if they have children), up to about $12,000 if not, can qualify for this credit. It is a refundable credit, meaning if you qualify based on income and family composition, you get a refund even if you do not owe any income taxes for the year. A tax credit comes off the total amount of taxes you owe, but generally cannot be any larger than that amount; yet, with the EITC, the government will pay you the surplus.

What makes it of special importance to people with disabilities is the age limit. Normally, you can only claim the credit for children up to 19 (24 if students). However, if the child meets the test of disability prescribed by the statute, then the age limit is waived.

See January EQUITY's Tip of the Month for more information on the EITC.

Child And Dependent Care Credit (IRC Sec. 21)--

There is a tax credit for when you have to purchase childcare to allow work outside the home. Depending on income and family size, this credit can be as much as $1,440 a year per family.

What matters for people with disabilities is that it is available to cover care of your spouse in your home or of a child over 13 when the spouse or older children is "incapable were self-care". This means being unable to do things like feed or dress oneself or in danger of harm to self. You don't have to document the nature of the disability on the form used to claim the credit, although you need to be able to justify the claim if asked.

Impairment-Related Work Expenses (Sec. 67 (d))--

People who earn their living from wages or salaries can claim an itemized deduction on their tax returns for certain employee business expenses. They can deduct these expenses only when they amount to more than two percent of the taxpayer's adjusted gross income (AGI). Workers with disabilities can benefit from this provision too, but they can also deduct their impairment-related work expenses (IRWE's) without being limited by that two percent floor.

Education (Sec. 530)--

Provided taxpayers put money aside in tax-deductible education savings accounts (up to $2,000 a year), the money in those accounts can be used tax-free to meet a variety of school costs. What matters to students with disabilities is that a number of "special needs" costs are included in qualifying costs that can be met with these savings. Computers and other technology- including devices used at home, but needed for school work or performance- are also covered. In addition, these accounts normally have age limits. You can't contribute to them once the beneficiary reaches age 18, and you have to distribute them by the time the beneficiary reaches 30. But in the case of individuals with special needs, these time-limits can be waived. Also, if a student incurs a disability, the advantages of tax-free withdrawals can be broadened.

Public Accommodations--

There are a number of provisions that aren't directly available to people with disabilities but that can have a great impact on their lives. These are provisions that employers, commercial establishments providing public accommodations, and anyone trying to figure out the real costs of reasonable accommodations need to know about. These include:

The Disabled Access Credit (Sec. 44)--

This provision allows small businesses a credit of as much as $5,000 to help defray the costs of accommodations including equipment needed to comply with the ADA.

Architectural And Transportation Barriers Removal Deduction (Sec. 190)--

Businesses that remove various physical and transportation barriers to access by "handicapped or elderly" persons can deduct those costs (as opposed to depreciating them) up to $15,000 per year.

Work Opportunity Tax Credit (Sec. 51)--

Businesses that hire members of targeted groups (including SSI recipients, who are most often people with disabilities, and persons referred by state vocational rehabilitation agencies) can claim a tax credit of as much as $2,400 for qualifying first-year wages paid to the employee.

See our Resources section for more information about these Tax Credits.

Steven Mendelsohn is a nationally recognized legal expert on tax policy and its impact on persons with disabilities. He is currently co-principal investigator of the Asset Accumulation and Tax Policy Project (AATPP) at the Law, Health Policy and Disability Center, University of Iowa, College of Law. AATPP is 100% funded by U.S. Department of Education grant #H133A031732.