Helpful Information on Disability Tax Credits and Benefits

Are you or a relative in need of disability tax credits and benefits? These are helpful for those who are unable to obtain continuous employment due to their disability.

Many elderly and handicapped Americans along with families may not yet be aware that citizens and residents (65 years and above) or those who are physically incapacitated can receive tax credits. This benefit potentially removes tax these people owe for the whole year.

Who Qualifies?

To reiterate older adults, 65 years and up during the current tax year are eligible. Taxpayers below 65 are also entitled to claim the credit for the following reasons: the person retired due to permanent or total disability, or he/she received taxable disability earnings within the year and fails to reach compulsory retirement on the first day of the tax year.

Permanent Disability

According to the Internal Revenue Service (IRS), the permanent disability status means an individual does not have the capability to be employed continuously.  It does not have anything to do with routing household activities. Yet, the IRS may consider this factor for disability. People who claim this credit must present a legitimate and updated medical certificate from the doctor.

Disability income must be paid as part of an accident, pension or health plan by former employers. Otherwise, tax credit requirements are not satisfied. Tax policies are the same for employment compensation during periods employees fail to report for work. The category does not include plan payments not selected to give disability benefits. One example is initial distributions from 401K accounts or cash settlements from accrued vacation days.

Income Limits

The IRS pointed out that the person’s total income must not go above prescribed caps. For single individuals who are heads of families or widowers with dependent children, the adjusted income must be below $17,500. Non-taxable pension and social security income must not go beyond $5,000. Couples who file joint returns should have adjusted gross earnings not more than $20,000 and ceiling of $5,000 for pension and social security.


Earned Income Tax Credit (EITC) is a benefit for employed persons with low up to moderate income. You may become eligible only after complying with IRS requirements and filing your tax return. This is mandatory even if you are not supposed to file or do not owe the government any levy. The EITC reduces the tax amount and may decide to give a refund.

The IRS classifies disability retirement benefits as income until the person reaches minimum age for retirement which entitles you to an annuity. Even people without infirmities are qualified to receive pensions. It is a different situation after reaching this age since IRS considers payment as pension and not earnings.

The agency does not count Social Security Income, Social Security Disability Insurance, and armed forces disability pensions as earned income. These may not be sued in claiming the EITC. However, you are qualified if either you or your spouse have alternative earned income and file joint returns. Any payment that comes from a policy for disability insurance, even if premiums have been paid, is not regarded as earned income.

Children must have their Social Security Numbers to meet the criteria of EITC. This number should be valid for work and issued prior to due date of the tax return. The child must take and pass residency, age, relationship, and joint return testing. Child means son, daughter, brother, sister, stepchild, adopted child, foster child, half siblings, stepbrother, stepsister, or any of their offspring.

Proof of Disabled Condition

You must secure a letter from a licensed physician certifying that a child is permanently and completely incapacitated. This is the major requirement for proving an EITC claim for children. In the absence of a doctor’s certificate, you may get this document from a healthcare provider or social service agency.

Sheltered Employment

Children who work for special programs that cater to paraplegics and receive small compensation is not engaged in gainful activities. Sheltered employment must be provided by authorized locations which include the following:

  • Hospitals
  • Healthcare institutions
  • Sheltered workshops
  • Homebound education programs
  • Homes sponsored by the Department of Veterans Affairs

The IRS or Volunteer Income Tax Assistance or Tax Counseling for the Elderly program provides assistance to persons with infirmities for free tax assistance. IRS sponsors both programs. Free File is the easiest and quickest method of preparing and filing federal taxes through the web. Besides, you need not pay anything for this service. Keep in mind it is necessary to file your returns before determining eligibility for claiming the EITC.