What the IRS Offers People with Disabilities

The IRS recognizes disability through several tax credits and deductions that reduce what you owe or increase your refund. These are separate from SSDI benefits themselves—they are tax breaks tied to your disability status or disability-related expenses. The main ones are the Earned Income Tax Credit (EITC), the Disability Tax Credit (available in some states), the Dependent Care Credit, and deductions for medical expenses and impairment-related work expenses.

You do not need to be receiving SSDI to claim these. You need to meet the IRS definition of disability for the specific credit or deduction, which sometimes differs from the Social Security definition. The IRS generally considers you disabled if you cannot engage in substantial gainful activity due to a physical or mental condition expected to last at least 12 months or result in death.

Key Takeaways

  • The Earned Income Tax Credit can return $560 to $3,995 per year if you work and earn below certain income limits, and the disability version removes the upper age limit that applies to others.
  • Medical expense deductions let you subtract disability-related costs—equipment, therapy, medications, home modifications—from your taxable income if they exceed 7.5% of your adjusted gross income.
  • Impairment-related work expenses are costs you pay to do your job because of your disability, and they reduce your taxable income dollar-for-dollar without a percentage threshold.
  • Some states offer their own disability tax credits on top of federal credits, so check your state tax authority's website for what may be available where you live.
  • You will need documentation of your disability status—either an IRS Form 8821 signed by your doctor, or a letter from Social Security if you receive SSDI or SSI.

The Earned Income Tax Credit (EITC) and Disability

The EITC is a refundable tax credit for people with low to moderate income who work. If you earn less than the income limit for your filing status, you can receive money back even if you owe no tax. For 2023, the maximum credit ranges from $560 for childless filers to $3,995 for filers with three or more children, though amounts change yearly.

The disability version of the EITC removes the age cap that normally applies. The standard EITC phases out for workers over 65; the disability version has no upper age limit. To claim it, you must have been permanently and totally disabled before the end of the tax year. You prove this with either a letter from Social Security stating you receive SSDI or SSI, or a statement from your doctor on IRS Form 8821 signed and dated.

You report the EITC on Schedule EIC (Form 1040). If you work part-time or seasonally, you may still may have access to if your total earned income for the year falls below the limit. The IRS website has an EITC calculator that shows whether you may have access to and estimates your credit amount based on your income and family situation.

Medical Expense Deductions

You can deduct disability-related medical expenses that exceed 7.5% of your adjusted gross income (AGI). This includes prescription medications, therapy sessions, medical equipment (wheelchairs, hearing aids, mobility aids), home modifications required because of your disability, and transportation to medical appointments. You report these on Schedule A (Form 1040) as itemized deductions.

The 7.5% threshold is the key limitation. If your AGI is $50,000 and your medical expenses total $4,500, only the amount above $3,750 (7.5% of $50,000) counts—in this case, $750. You must itemize deductions rather than take the standard deduction for this to benefit you, which means your total itemized deductions must exceed the standard deduction for your filing status.

Keep receipts, invoices, and explanation of benefits (EOB) statements from insurance for at least three years. If the IRS asks, you need to show what each expense was and why it was medically necessary. Some costs—like a portion of your rent if you modified your home for accessibility—may be deductible, but you should document the connection to your disability clearly.

Impairment-Related Work Expenses

Impairment-related work expenses (IRWE) are costs you pay specifically to enable you to work because of your disability. These reduce your taxable income dollar-for-dollar with no percentage threshold, making them more valuable than medical deductions in many cases. Examples include a personal attendant at work, specialized transportation to your job, adaptive equipment you use only for work, or medication you take solely to work.

The expense must be directly tied to your ability to perform your job. A wheelchair you use everywhere does not may have access to as IRWE, but a specialized lift system installed in your workplace does. A medication you take for general health does not may have access to, but one you take specifically to manage symptoms that would otherwise prevent you from working may.

You report IRWE on Schedule C (if self-employed) or as an adjustment to income on Form 1040. You will need to document what the expense was, when you paid it, how much it cost, and how it relates to your disability and your work. The IRS may ask for a letter from your employer or medical provider explaining the connection.

State Disability Tax Credits

Some states offer their own tax credits for people with disabilities, separate from federal credits. These vary widely by state: some offer a flat credit, others tie it to income, and some require you to be receiving SSDI or SSI. A few states have no disability-specific credit at all.

Check your state's tax authority website or call their helpline to learn what is available where you file. If you live in one state but work in another, you may be able to claim credits in both, though rules differ. State credits are claimed on your state tax return, not your federal return, and the amounts and income limits change yearly.

How to Prove Disability to the IRS

The IRS accepts two main forms of proof that you are permanently and totally disabled. The first is a letter from Social Security stating that you receive SSDI (Social Security Disability Insurance) or SSI (Supplemental Security Income). This letter is usually sent to you automatically when your claim is approved, but you can request a new copy from your My Social Security account or by calling Social Security at 1-800-772-1213.

The second is a statement from your doctor on IRS Form 8821 (or a similar letter on the doctor's letterhead). The form must be signed and dated by a licensed physician and state that you are permanently and totally disabled. You do not file this form with the IRS; you keep it with your tax records in case the IRS asks to see it during an audit.

If you are claiming the EITC with disability status, you must attach the proof to your tax return or have it ready if the IRS requests it. If you are claiming medical deductions or IRWE, you do not need to prove disability status separately—you straightforward report the expenses and keep documentation of what they were.

Income Limits and How They Affect Your Credits

Most disability-related tax credits and deductions have income limits or phase-out ranges. The EITC, for example, begins to reduce as your income rises and disappears entirely at higher income levels. Medical expense deductions only help if your expenses exceed 7.5% of your AGI, so higher income means a higher threshold to cross.

Your income for tax purposes includes wages, self-employment income, interest, dividends, and certain other sources. SSDI benefits are not counted as income for federal tax purposes, but SSI may be, depending on your situation. If you are unsure whether a particular income source counts, the IRS website has worksheets and examples, or you can speak with a tax professional.

If your income is close to a phase-out limit, timing matters. Some people can reduce their income by making certain moves—contributing to a traditional IRA, for example—that lower their AGI and preserve more of a credit. A tax professional who works with people with disabilities can advise on strategies specific to your situation.

Frequently Asked Questions

Do I have to be on SSDI to claim these tax credits?

No. You can claim disability-related tax credits if you meet the IRS definition of disability, which does not require you to be receiving SSDI or SSI. However, if you do receive SSDI or SSI, a letter from Social Security is the easiest way to prove your disability status to the IRS.

Can I claim both the EITC and medical expense deductions in the same year?

Yes. The EITC is a credit (it reduces your tax dollar-for-dollar), while medical deductions are deductions (they reduce your taxable income). You can use both if you meet the requirements for each. However, you must itemize deductions to claim medical expenses, which means your total itemized deductions must exceed your standard deduction.

What counts as a home modification for the medical deduction?

A home modification counts if it is necessary because of your disability and not something that adds value to your home generally. A wheelchair ramp, grab bars, widened doorways, or a roll-in shower typically may have access to. A new roof or general home improvement does not, even if you use it. The IRS looks at whether the modification is primarily for medical care or primarily for general use.

If I work part-time, can I still claim the EITC?

Yes. The EITC is based on your total earned income for the year, not on whether you work full-time or part-time. If your total earned income is below the limit for your filing status, you may be able to claim it. Self-employment income also counts as earned income.

Do I need to file taxes if my only income is SSDI?

No. SSDI is not taxable income, so if SSDI is your only income, you do not have to file a federal tax return. However, if you have other income—wages, self-employment, interest—you may need to file. Filing can also be beneficial if you are owed a refund from taxes withheld or if you may have access to for the EITC.