By: Armand Legault
While most people with disabilities are familiar with the benefits of the typical medical deductions when preparing tax returns, many are unaware of the other significant deductions they can claim. For the disabled person who is working part-time or full-time (either inside or outside the home), impairment-related work expenses (IRWE) are an often-overlooked source for major tax breaks.
To qualify, you must have impairment that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working. These business deductions are 100 percent deductible, unlike medical expenses, which must exceed 7.5 percent of your adjusted gross income (AGI) before they can be deducted.
Also, unlike unreimbursed employee expenses, disability-related business expenses aren’t capped at 2 percent of your AGI. If it comes out of your pocket and it is required in order for you to be an employable person, you can deduct it as a non-reimbursed employee expense.
Some Examples of IRWE are:
• The cost of structural or operational modifications to your vehicle that you need in order to travel to work, even if you also use the vehicle for non-work purposes.
• The cost of driver assistance or taxi service that is required because of your disability rather than the lack of public transportation.
• Services performed to help you prepare for work, the trip to and from work, and after work; for example, bathing, dressing, cooking, and eating.
• Medical devices, including wheelchairs.
• If you are employed outside the home, modifications to the exterior of your house that permit access to the street, such as exterior ramps and pathways.
• If you are self-employed at home,modifications made to create a workspace to accommodate your impairment. This includes enlarging a doorway into an office.
• Work equipment such as an adapted workstation or modified computer keyboard.
Advice for the Unemployed
If you’re unemployed, focus on maximizing your medical deductions. You may deduct out-of-pocket, un-reimbursed medical expenses that exceed 7.5 percent of your AGI. For example, if your AGI is $40,000, and you had $5,000 in medical expenses, you may deduct expenses over $3,000 (7.5 percent of AGI), leaving you $2,000 in deductions. These expenses must relate to the diagnosis, cure, mitigation, treatment, or prevention of disease.
In addition to the standard medical deductions, such as health insurance premiums, you may qualify to claim the following as medical expenses:
• The extra cost of electricity and/or batteries for lifts and wheelchairs, as well as maintenance costs for these items.
• The extra cost associated with purchasing a wheelchair-accessible vehicle, or the cost of modifying an existing vehicle.
• Transportation and admission to conferences specifically about your disease (but not meals and lodgings).
• Yard and housework expenses for chronically ill individuals (those who need help with at least two activities of daily living, such as eating, toileting, transferring, bathing or dressing.)
• Higher expenses due to having a live-in attendant, such as higher utility or food costs.
• The cost of acquiring, feeding, and caring for a service animal.
• The extra costs of a doctor-prescribed special diet.
• The cost of nonprescription supplements recommended by a doctor, providing they’re prescribed specifically to treat your condition and not just for general health.
• The cost of a swimming pool, providing you have a doctor’s prescription and can justify that the pool is mainly for therapeutic use.
• Personal attendant care services.
Home modifications fall under the umbrella of medical expenses that are deductible if you are disabled. A good rule of thumb is: anything you have to buy that your neighbor doesn’t (related to your disability) is usually deductible. The remodeling costs must be directly to a disability and cannot increase a home’s value.
Specific types of eligible expenses include:
• Constructing entrance or exit ramps to the residence.
• Widening doorways at entrances or exits to the residence.
• Widening or otherwise modifying interior doorways and hallways to accommodate wheelchairs.
• Installing railings, support bars, or other modifications to bathrooms.
• Lowering or other modifications to equipment or kitchen cabinets.
• Adjusting electrical outlets and fixtures.
Stay Organized and Keep Receipts and Records
Always be prepared to support your claims with receipts and a physician’s prescription that specifies the deducted expense is related to your health condition. If you have qualified for these deductions before, but never claimed them, you can go back three years and file an amended return.
Not all professional tax preparers are aware of all of your options as a disabled person. Find someone who is willing to explore your unique situation so you can get all the deductions you deserve. And remember, you can always do your own taxes.
Armand Legault worked for 33 years as a state tax auditor. He now gives tax seminars for people with disabilities, certified public accountants (CPAs) and other tax preparers. He is a member of the Connecticut Council on Developmental Disabilities. Legault has spinal muscular atrophy.
(Last reviewed 2/2010)