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.
💠 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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