We all know the saying—“When life gives you lemons, make lemonade.” One of the ways that individuals with disabilities can “make lemonade” out of the endless financial burden of living with a disability is by taking advantage of unique tax deductions available to them.
Under the Tax Cuts and Jobs Act, the medical expense deduction floor of 26 U.S.C. § 213 was temporarily reduced from 10 percent to 7.5 percent. This means that until the tax cuts are no longer in effect, individuals can deduct expenses, not compensated for by insurance or otherwise, for medical care of themselves, their spouses, or their dependents, to the extent that the expenses exceed 7.5 percent of their adjusted gross income.
The financial savviness of the individual comes into play when categorizing and tracking expenses that can be deducted as “medical care” expenses. Common medical care expenses explicitly listed in 26 U.S.C. § 213(d) are amounts paid for medical and preventative treatment, transportation primarily for and essential to medical care, qualified long-term care services, medical insurance, lodging during medical care, and prescription drugs.
Perhaps the category most critical for individuals with disabilities to understand is “qualified long-term care services,” which means “necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal care services” required by the individual and pursuant to a plan of care prescribed by a licensed health care practitioner. 26 U.S.C.A. § 7702B. The IRS has created a list of excludable medical expenses, available at https://www.irs.gov/publications/p502. Individuals with disabilities should not only review the list to identify deductible expenses, but also consult an attorney to ensure that they are taking the most tactical approach to tax deductions.
A few expenses that individuals with disabilities might not realize are tax deductible include, but are not limited to, amounts paid for:
• Braille books and magazines for use by a visually impaired person that are more than the cost of regular printed editions;
• Special equipment installed in a home, or home improvements, if their main purpose is medical care;
• Medical supplies and equipment, such as bandages, contact lenses, eye glasses, crutches, hearing aids, adaptive telephone and television equipment, and wheelchairs;
• Specially designed vehicles to the extent of the difference between the cost of a regular vehicle and the vehicle especially designed to hold a wheelchair;
• Service animals, including costs of buying, training, and maintaining the animals;
• Nursing services and maintenance or personal care services for the primary purpose of providing individuals with necessary disability assistance;
• Special homes for intellectually and developmentally disabled individuals;
• Medical attendants’ food and the extra rent or utilities paid due to moving to a larger apartment to provide space for attendants; and
• Special education expenses.
Finally, individuals with disabilities who work should be aware that they can deduct impairment-related work expenses, and these business deductions are not subject to the 7.5 percent deduction floor that applies to medical expense deductions. These individuals can take a business deduction for expenses that are (1) necessary for them to perform their work satisfactorily, (2) for goods and services not required or used, other than incidentally, in personal activities, and (3) not specifically covered under other income tax laws. Further, these impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. Contact a tax advisor for information on how to report these expenses on tax forms.