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| The Basics | IRS helps disabled hold on to financial health
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There's at least one good thing about the tax code: it can help people coping with long-term physical problems. Here's a guide to tax breaks for the disabled.
By Jeff Schnepper
There are some injustices in this world we cannot do anything about. A loved one is hurt in a car accident and cant walk. A child is born deaf. You suffer debilitating pain every day from arthritis and the only solace is being able to swim in a pool filled with warm water.
As much as we like to put down our tax code and the people who write it, this is one case where the tax code and its authors rise to the occasion.
Parts of the code are written to help people with disabilities and to encourage businesses to spend the money necessary to allow people with disabilities to get by. The codes not perfect, as youll see, but the provisions are there. Use them, and they can save you money.
Here are the big breaks for individuals:
Additional standard deduction
This is designed for people who are aged (defined as age 65 or older) or people who are blind. The IRS will classify you as 65 or older for the year 2004 if your 65th birthday falls on Jan. 1, 2005 or earlier.
You are considered blind if your central visual acuity doesnt exceed 20/200 in your better eye with corrective lenses, or if the diameter of your visual field subtends an angle of 20 degrees or less.
For 2004, this additional standard deduction for the aged or blind is $950 for each taxpayer on a joint return, or $1,200 if youre unmarried and not a surviving spouse.
Medical expenses to cope with disabilities
In addition to medical insurance, drugs, hospital and physician costs, the disabled can deduct:
- Special equipment such as motorized wheelchairs, hand controls on a car and special telephones for the deaf.
- Special items, including false teeth, artificial limbs, eyeglasses, hearing aids, crutches, Braille books and guide dogs for the blind.
- The cost of special school programs for children with attention deficit hyperactivity disorder.
- The cost of programs and prescriptions to help you stop smoking. (But we have to note you cant deduct the costs of over-the-counter patches and anti-smoking chewing gum but, they can be qualified expenses for your flexible spending account.)
- Radical keratotomy surgery to correct your vision.
- Meals and lodging where you get medical treatment, including treatment for alcoholism or drug addition.
Special care
These payments may also be included in your deductible medical expenses:
- Payments to special schools for people who are mentally or physically disabled. These include tutoring expenses incurred on a doctors orders for someone with severe learning disabilities caused by a nervous system disorder, teaching Braille to the blind or lip reading to the deaf.
- Payments to a nonprofessional for giving patterning exercises (coordinated physical manipulation of limbs to imitate crawling or other normal movement) to a mentally retarded individual.
- Advance payments to a private institution for the lifetime care, treatment, or training of a mentally or physically disabled individual. These payments must be required as a condition of the institutions future acceptance of the individual and cant be refundable.
- Expenses paid for the care of an invalid individual in your home.
Expenses for special equipment in your home. You can deduct the cost of special equipment installed in a home for medical reasons, even if theyre capital improvements. The amount spent in excess of the increase in value of your home is allowed as a medical deduction.
Lets say you have a heart condition and, under doctors advice, you install an elevator in your house so you dont have to climb stairs. The elevator costs $1,000 but only increases the value of your house by $700. The $300 difference is an allowed medical expense.
If you rent, the amount incurred is deductible in full. So if you have arthritis and a bad heart condition, and you install a bathroom on the first floor of your rented house under doctors orders, the whole amount you pay for the new plumbing is a deductible medical expense.
Expenses for improvements to accommodate the disabled
The Internal Revenue Service lets you deduct in full, as medical expenses, home improvements made to accommodate someone in the family whos disabled. These include:
- Entrance or exit ramps to the house.
- Widened doorways and entrances or exits to the house.
- Widened or modified halls or interior doorways.
- Railings, support bars, or other modifications installed in bathrooms.
- Lowered or modified kitchen cabinets or equipment.
- Moved or altered electrical outlets and fixtures.
- Installation of porch lifts or other forms of lifts -- but not elevators.
- Modifications to fire alarms, smoke detectors and other warning systems.
- Modifications to stairways.
- New handrails and grab bars, whether or not in the bathroom.
- Changes to hardware on doors.
- Alterations to areas in front of entrance and exit doorways.
- New grading on your property to provide access to the home.
There is, of course, one catch. If youre claiming expenses as medical deductions, you can deduct only the amount of your expenses that exceed 7.5% of your adjusted gross income. If you think you may qualify for these expenses, consult an accountant or qualified tax preparer.
Business breaks for the disabled
Businesses can deduct the costs of removing barriers to the disabled and the elderly. They also may qualify for special credits that reduce their taxes on a dollar-for-dollar basis, including:
The Work Opportunity Credit. This is a tax credit for businesses that hire individuals from certain targeted groups. Qualified hires include blind or disabled individuals who receive Supplemental Security Income (SSI) benefits. Qualified hires also include people who have gone through state vocational-rehabilitation programs with written plans for training and job placement. This credit was extended through 2005 by the Working Family Tax Relief Act of 2004.
Disabled Access Credit. A business may qualify for this credit for expenses to provide access to persons with disabilities under the Americans with Disabilities Act (ADA). These include not only wheelchair and similar access, but also include, for example, expenditures to allow blind individuals to access a business Web site. While none of these special credits or deductions will eliminate a disability, they all do stimulate activity to improve lives. On occasion, we can find tax code provisions that actually make sense.
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