What Tax Credits Can People Who Are on Social Security Disability Get?

The IRS provides disabled Social Security recipients tax credit benefits.

The Internal Revenue Service, or IRS, provides several federal tax benefits to Social Security disability recipients. Laws have been enacted to help disabled taxpayers exclude taxable disability benefits as taxable income. The IRS provides dependent care benefit credits and excludes disability income from the disabled individual's taxable income base. The IRS also provides tax credit programs to eligible disabled taxpayers.

Dependent Care Benefits

The expenses the disabled taxpayer incurs for dependent care can be excluded from income. The disabled taxpayer must complete Form 2441, Part III, instead of using 1040EZ to claim the excluded amount. The taxpayer's spouse may also claim the exclusion if the spouse needs the care in order to work.

Social Security Benefits Excludable Income

Individuals receiving Social Security disability benefits do not have taxable income, according to the IRS' regulations. The IRS will exclude up to $25,000 of government support for single taxpayers. Taxpayers who file jointly may exclude up to $32,000 of Social Security benefits. Form 1040, lines 20(a) and (b), provides detailed information for the disabled taxpayer.

Earned Income Tax Credit

Taxpayers may qualify for the earned income credit if their adjusted gross income annually is less than the maximum threshold allowance. For 2012, the limit is $13,980 for single taxpayers without children. For taxpayers who are married and file jointly, the limit is $19,190. The IRS increases the limit to $42,130 for married taxpayers filing jointly with one dependent child. The amount increases by over $5,000 for an additional child. However, for taxpayers with three or more dependents, the limit is capped at $50,270.

Credit for the Disabled (or Elderly)

The IRS provides a credit for permanently disabled individuals. In order to qualify for Social Security benefits, the Social Security Administration extends benefits only to those who suffer from long-term or permanent disabilities. The exact amount of the federal tax credit depends upon the individual taxpayer's filing status and adjusted gross income. The IRS allows a $3,750 exemption for single taxpayers. The amount is $7,500 for head of household taxpayers who are divorced or separated. Generally, the IRS caps the credit amount at the taxpayer's federal tax liabilities. This means that if the individual taxpayer's credit calculation exceeds the individual's tax liabilities, the individual will only qualify for a limited tax credit to reduce the tax liability base. In this case, the individual will not owe taxes but will not qualify for a refund check for the difference between the tax credit and the tax liability.

Low-Income Taxpayer Clinics

These programs help taxpayers with their tax problems if their income is below a certain threshold amount. Although the credit is open to all low-income taxpayers, the federal government considers most disabled Social Security recipients as low-income individuals if they do not earn other income from employment.

references & resources