What is a Disability Tax Credit?

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  • Written By: Jim B.
  • Edited By: Melissa Wiley
  • Last Modified Date: 07 December 2019
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A disability tax credit is a tax credit given to a person with some sort of serious mental or physical impairment. In the United States, a person must be less than the standard retirement age and must be receiving disability payments from a former employer to receive the credit. The amount of the disability tax credit a person can claim depends on income level, the amount of non-taxable benefits like social insurance or pension payments, and his or her filing status. Once a person is deemed eligible, the tax credit will be applied against the taxes owed, and if the credit is the larger amount, results in a tax refund.

Many people in the United States are eligible each year for various reasons to receive tax credits, which are set against the money owed to the U.S. Internal Revenue Service, or IRS. The government is especially cognizant of the earnings issues suffered by those people who have some kind of impairment that won't allow them to work for a living. A disability tax credit can help ease the burden on those people.


It is important to understand what constitutes a disability that is considered eligible for a disability tax credit. The main standard is that the disability, whether it is mental or physical, must prevent the individual from performing substantial gainful activity in the specific 12-month period for which taxes are taken. Substantial gainful activity includes any tasks that an individual can perform for pay. For example, an individual might be able to perform simple household chores, but would qualify for the tax credit if he wasn't able to haul heavy equipment as his former job required.

Anyone less than the age of 65 or less than the specific age of retirement for the profession in question who fits this description can conceivably be eligible for the disability tax credit in the U.S. There are other qualifications that must be met, though. For instance, an amount of gross income or non-taxable benefits like Social Security payments that exceeds a certain level would disqualify a person from the credit. Those levels are dependent on whether the person filing is married and if the person is filing alone or with a spouse.

Once a person knows he is eligible for the tax disability tax credit, he can go about determining how much the credit will be worth. Again, this amount is dependent on income levels and the status of the person filing. If the person is eligible for the credit, it could result in a tax refund if the amount of the credit is more than the income tax owed in that particular year. On the other hand, if the credit is less than the tax owed, it works as a deduction from the amount owed.


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