This page is a work-in-progress. Please comment below with your tax stories, input, ideas and discoveries.
💠 Most areas have special programs that will allow you to pay little or no property taxes if you have a disability. Learn more about Property Tax Relief Programs
💠 If you missed your chance to apply, it may not be too late. In some states, property tax exemptions can be processed retroactively, for the past 2-3 years.
Taxes and Social Security Disability
💠 Great article by Attorney Mike Murburg Social Security Disability Tax Questions.
💠 In some areas, property tax assessment office will also offer car tax relief for the elderly or disabled. Contact your local tax assessors office.
Taxes on Pension Plan Withdrawals
💠If you are taking an early withdrawal on your retirement plan, you may encounter penalties. Here’s some ideas for: How to Avoid Penalties from Retirement Plan Early Withdrawals
💠 You may be able to deduct medical expenses on your taxes.
💠 Many many things can count as medical expenses! In certain situations costs of vitamins, supplements, meals, transportation, and many other things you might not expect. Learn more in this IRS booklet on Medical expenses.
💠 Also check out: How to Document Medical Expenses
Home Aide Salaries
💠 If you have a home aide paid through a Medicaid Waiver program, and this person lives with you, they may be eligible for a special tax break called “difficult of care.” Learn about this and other: Extra Benefits & Services for People in Medicaid Waiver Programs
💠 This is commonly used by people who live with family members who are their aides. However, even if you are not related to your aide, they will still be eligible for this tax exclusion.
Taxes on Social Security Checks
💠 SSI is never taxed.
💠 SSDI is sometimes taxed, but not always. It depends on your provisional income. Tip: Provisional income is not all your income. Provisional Income and Taxes. Here are some basic tax rules for SSDI.
💠 If you are living separately from your spouse for the entire year, you may wish to file separately, so your spouse’s income does not cause your Social Security to be taxed. If you are living together for any part of the year, you probably don’t want to file separately, because there are some bad rules that may make you owe way more taxes. Learn more.
Working and Taxes
💠 If you are working, check out: Five Secrets About Social Security Disability, Working & Taxes
Marriage and Taxes
💠 If you are married, in some situations, filing taxes separately can cause you or your spouse to owe more taxes. More info here.
💠 If you received a large Social Security backpay check when your disability was approved, you do not have to declare it all in one year. You can fill out your tax returns to divide the money across the years that were covered (for example: $20,000 per year for four years, instead of $80,000 all at once). IRS Rules on Backpay.
💠 If you live with your adult children or parents and they paid most of your expenses, they may be able to declare you as a dependent on their taxes and lower their tax bills. (Warning: This is safe on SSDI. If you are on SSI, proceed with caution. Receiving free food or housing can cause your disability check to be lowered.) Free rent may also cause your food stamps to be lowered.
Student Loan Disability Discharge
💠 If you got a disability discharge on student loans, see: How to Escape Tax Problems from Student Loan Discharges.
💠 Update: Laws have changed and most disability discharges no longer cause tax problems!
More Tax Tips
💠 If you are disabled and low income, you may be eligible for a IRS Credit for the Elderly or Disabled. This only applies to certain types of income. https://www.irs.gov/pub/irs-pdf/p524.pdf
💠 This accountant has written an article about using hardship status to reduce or eliminate your tax bill. If anyone has tried this or knows more, please post below. http://howardlevyirslawyer.com/2009/01/09/is-there-such-a-thing-as-a-hardship-status-with-the-irs/
If you owe money from the past, you may be able to amend or refile past tax returns to change the amount you owe. Please see above to see if any of the rules below would apply to your past taxes.
Please post below if you have ideas to improve this page. If anyone has tried any of the above, please let us know how it went.
“The IRS was taking a percentage of money out of my SSDI checks because of taxes I owed. Well, I just sent them a letter stating that it was causing me to be homeless. They didn’t answer, so in a couple weeks, I sent a second letter. After my 2nd letter they wrote back saying that they was sorry about inconveniencing me and they stopped taking my money. They said to let them know if my monetary situation changed to let them know. The debt expires after 10 yrs.” – Linda Love
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14 thoughts on “How to Get Tax Breaks for Disabilities”
I’m a little confused. I just won my SSI case and I’ll be getting some backpay. Will I be exempt from paying taxes on that since it’s SSI, not SSDI? Thank you so much for the amazing website! 💛
To my knowledge, there are no taxes on SSI. If you have other kinds of income, that might be taxed. Congrats. 🙂
This is a plethora of information! Thank you so much, best resource I’ve found yet!
Hi, my mother in law is behind on her property taxes about $20,000. They are going to foreclosure soon if those aren’t paid. She is disabled, living on social security. Her husband who was a veteran died a few years ago so its just her. She isn’t receiving any help from him being a vet either which I thought was odd. Is there help out there for her in Wisconsin for her property taxes?
I think you would need to contact your local tax assessors office and ask if they have any special programs for people who are elderly and disabled to help with the property tax.
Also ask if it can be applied retroactively, can she still apply now to cancel the debt from past years? I hope they will be able to help her.
Thank you for this insightful post–and all amazing wealth of information you provide on your site!
I am trying to determine how long mt SSDI backpay savings are protected from being a “countable asset” per Medicare eligibility laws. My backpay is roughly $30,000. I struggle to find information on whether or not Medicare can count this against me if I do not spend it in X months. Is Medicare allowed to take it for medical expenses they previously covered, if I keep SSDI savings for too long?.
Hi Lucy, There is no asset limit for Medicare. Are you on any Medicaid programs? There is a Medicaid program that pays medicare premiums and co-pays and does have an asset limit in most states.
Thank you so much for your site. It contains so much helpful information and I love the sense of humor you display. After nearly 3 years, I was just approved last week. My attorney’s office has basically raised their hands and said, “Social Security will contact you within 30 days.” I am left with so many questions. I obviously have never been through this and they are no help. This site has answered many of my questions, and for that, I sincerely thank you.
How do I change my name? Would like just my last initial to be displayed.
Thank you for this lovely post juli. I will see if I can figure out how to change your name. ❤
Many many thanks for posting great information, you are a tremendous help!
I owe roughly $4,000 in back taxes, will this amount be taken fully from my back pay or portions deduced from my monthly check until paid in full?
Also, will I have to pay taxes for the amount I received from SSDI lump sum backpay ?
I’m sorry to say you’ve hit upon some questions I don’t know the answer to here 🙂
Wow, what an amazing site you have, thank you, can’t imagine the work and hours you’ve put into this! Question- I recently was awarded SSDI, 1st payment will be July 11th 2018 then will receive monthly on the 2nd Wed of every month. I’m in the process of receiving a “Employee cash account” lump sum amount of $43,000 (-20% Fed and 10% of Fed to state taxes) from ex-employer, will this alter my SSDI?, do I need to declare this money? who do I report it to? Thank you again for this amazing site!!!!!!
Thank you so much for your kind comments.
I’m sorry to say I have no clue the answer to your questions.
I hope you may be able to consult with an account about this.
Congrats on your approval. ❤