5 Tips for Spouses of Disabled Taxpayers

If your spouse is disabled enough to receive disability benefits, your financial life is affected, too. It’s important to know the provisions of the Internal Revenue Service (IRS) code that affect you and your spouse when it comes to disability taxes.

Read these tips if your spouse receives disability income.

1. Know whether you need to pay disability taxes on your spouse’s disability income.

The main determining factor in whether disability insurance income is taxable is who paid the premiums for the policy. If your spouse paid premiums for disability insurance, using after-tax money, the disability income is not taxable.

If your spouse receives Social Security disability benefits, and the two of you have significant other income, you may pay disability taxes on the income. If you have little or no other income, you won’t have enough taxable income to owe federal income tax.

If your spouse’s employer pays disability benefits, or if your spouse receives benefits from an insurance plan paid for by his or her employer, the taxable income includes those benefits.

2. Adjust your income tax withholding, if necessary.

If you are now in a lower tax bracket because your spouse is unable to work, you probably owe far less in taxes than you used to pay. Because of that, you may need to adjust your Form W-4 to claim additional withholding allowances.

Always estimate your taxes before making adjustments to avoid an unpleasant bill at tax time.

3. Find out about the Tax Credit for the Elderly and Disabled.

The Tax Credit for the Elderly and Disabled applies to qualifying taxpayers with very low-income levels. If you work full-time and your spouse receives disability benefits, you probably do not qualify for the credit.

However, you may qualify for the credit if the following is true:

  • a doctor has certified that your spouse’s disability prevents him or her from working
  • your spouse’s condition is expected to last longer than a year or result in death
  • your spouse had taxable disability income during the year

4. Check out the Child and Dependent Care Credit.

If you pay someone to care for your spouse while you work (or look for work), you may qualify for the Child and Dependent Care Credit. This credit is based on a percentage of the amount paid for your spouse’s care.

To qualify, your spouse must be physically or mentally incapable of self-care and live with you for over half the tax year. You also must have earned income from a job, unless you qualify for an exception as a student or you are also disabled.

You cannot claim the credit for money you pay to yourself or certain other relatives.

5. Keep track of medical expenses all year.

Claim all of your medical expenses if the total exceeds the deductible threshold on your tax return. That includes the cost of care for yourself, your spouse, and any other dependents. A few commonly missed medical deductions are expenses for travel to receive medical care, prescription costs, and vehicle mileage for care in your local area.

One potentially significant medical expense is the cost of modifying your home for a disabled person. You can consist of expenses such as wheelchair ramps, stair lifts, wider doorways, and grab bars.

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