What tax credits can reduce what you owe if you have a disability

The federal government offers three main tax credits that reduce your tax bill if you have a disability or care for a disabled dependent: the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, and the Credit for the Elderly and Disabled. Each has different income limits, different rules about what counts as income, and different amounts you can claim. Most people with disabilities on SSDI do not earn enough to owe federal income tax, but you may still file a return to claim a refundable credit — one that pays you money even if you owe nothing.

The key difference between a credit and a deduction is that a credit directly reduces your tax bill dollar-for-dollar, while a deduction only reduces the income you are taxed on. For someone with low or no earned income, a credit is almost always more valuable. You cannot claim the same expense twice — for example, you cannot claim childcare costs under both the Child and Dependent Care Credit and the Dependent Care FSA deduction.

Key Takeaways

  • The Earned Income Tax Credit can return $600 to $3,995 per year if you have earned income below certain thresholds, even if you owe no tax.
  • The Child and Dependent Care Credit covers up to $3,000 in childcare or adult care expenses per year if you paid for care so you could work or look for work.
  • The Credit for the Elderly and Disabled applies if you are under 65 and permanently and totally disabled, with income below $17,500 (single filers).
  • SSDI benefits themselves are not taxable income for the purpose of these credits, but wages, self-employment income, and some other sources count toward income limits.
  • You must file a tax return to claim any of these credits, even if you have no tax liability.

The Earned Income Tax Credit (EITC) and work incentives

The EITC is a refundable credit for people with low earned income from wages or self-employment. If you work part-time or earn under the income limit, you may receive a credit that exceeds what you owe in taxes — the IRS sends you the difference as a refund. For 2024, the maximum credit ranges from $600 (no children) to $3,995 (three or more children), though the exact amount depends on your income, filing status, and number of may have access to children.

SSDI benefits do not count as earned income for the EITC, so they do not reduce your credit. However, your wages and net self-employment income do count. If you earn $1,000 in a year and receive $12,000 in SSDI, only the $1,000 counts toward the EITC calculation. This makes the EITC particularly valuable for people testing work while on SSDI — you can earn a modest amount and still claim the full credit. The income limits are high enough that many people with SSDI can work part-time and remain within range.

To claim the EITC, you must file Form 1040 or 1040-SR and include Schedule EIC if you have may have access to children. The IRS will calculate the credit for you if you leave the line blank, but you can also calculate it yourself using the worksheets in the instructions or the IRS EITC Assistant tool on irs.gov.

Child and Dependent Care Credit for care expenses

If you paid someone to care for a child under 13 or a disabled dependent (including a spouse) so that you could work or look for work, you may claim the Child and Dependent Care Credit. The credit covers up to $3,000 in expenses per year for one dependent, or $6,000 for two or more. The credit itself is worth 20% to 35% of those expenses, depending on your adjusted gross income — the lower your income, the higher the percentage.

may have access to expenses include daycare, preschool, summer camp, and in-home care by a nanny or aide. They do not include school tuition for kindergarten or higher, overnight camp, or care provided by a family member you claim as a dependent. The person or facility providing care must give you their name, address, and tax ID number (usually a Social Security number or EIN). If they do not provide this information, you cannot claim the credit.

You claim this credit on Form 2441 (Child and Dependent Care Expenses). SSDI benefits do not count as income for this credit, so if you have no earned income but pay for care of a disabled dependent, you cannot claim it — you must have earned income (wages, self-employment, or taxable scholarship income) to use this credit. However, if you have a spouse who works, you can file jointly and use their income to may have access to.

Credit for the Elderly and Disabled for permanent disability

The Credit for the Elderly and Disabled is a non-refundable credit worth up to $750 (single filer) or $1,125 (married filing jointly) if you are permanently and totally disabled and under age 65. You are considered permanently and totally disabled for tax purposes if you are unable to engage in any substantial gainful activity because of a physical or mental condition expected to result in death or last indefinitely.

The income limits are strict: $17,500 for single filers, $21,250 for married filing jointly, and $13,750 for married filing separately. These limits include not only wages but also taxable pensions, taxable Social Security benefits, and taxable interest and dividends. SSDI benefits themselves are not taxable, so they do not count toward the limit — but if you have other income sources, those do. The credit phases out dollar-for-dollar above the limit, so even $1 of income over the threshold reduces the credit.

To claim this credit, you must file Form 1040 or 1040-SR and include Schedule R (Credit for the Elderly and Disabled). You will need proof of your disability status. The IRS will accept a copy of your SSDI award letter, a letter from the Department of Veterans Affairs confirming permanent disability, or a statement from your physician. Keep this documentation with your tax records in case the IRS asks for it later.

How SSDI income counts (and does not count) for tax credits

SSDI benefits are not taxable income under federal law, which means they do not appear on your tax return as income and do not count toward income limits for most tax credits. This is a significant advantage: you can receive $12,000 in SSDI and $8,000 in wages, and only the $8,000 counts for purposes of the EITC or the Credit for the Elderly and Disabled. If you were receiving Supplemental Security Income (SSI) instead, the same rule applies — SSI is also not taxable.

However, other income sources do count. Wages, self-employment income, taxable pensions, taxable Social Security retirement benefits, taxable interest, and taxable dividends all count toward income limits and reduce credit amounts. If you have a spouse who works, their income counts if you file jointly. If you file separately, your spouse's income generally does not count, but married filing separately status disqualifies you from many credits entirely.

The IRS uses your adjusted gross income (AGI) to determine credit amounts for the EITC and the Child and Dependent Care Credit. Your AGI is your total income minus certain deductions (like educator expenses or student loan interest). SSDI does not appear on your AGI, so it does not reduce the credit you can claim.

Filing requirements and where to report credits

You must file a federal income tax return to claim any of these credits, even if you have no tax liability and no one is required to file. This is because these credits are only available to people who file. If you have earned income of any amount, you should file to claim the EITC. If you paid for dependent care, you should file to claim the Child and Dependent Care Credit. If you are permanently and totally disabled and under 65 with income below the limit, you should file to claim the Credit for the Elderly and Disabled.

You file your return with the IRS using Form 1040 or 1040-SR (for age 65 and older). Include the appropriate schedule or form for each credit: Schedule EIC for the EITC (if you have may have access to children), Form 2441 for the Child and Dependent Care Credit, and Schedule R for the Credit for the Elderly and Disabled. If you are filing electronically, your tax software will walk you through the questions and generate the correct forms automatically.

If you cannot afford to file on your own, the IRS Volunteer Income Tax information (VITA) program offers free tax preparation at libraries, community centers, and nonprofit organizations. To find a VITA site near you, visit irs.gov or call 211. Many sites specialize in serving people with disabilities and can explain how your SSDI affects your tax situation.

Interaction with other benefits and work incentives

Tax credits do not affect your SSDI benefits. Claiming the EITC, the Child and Dependent Care Credit, or the Credit for the Elderly and Disabled will not reduce your monthly SSDI payment or trigger a work incentive review. The Social Security Administration does not count tax refunds as income for purposes of the substantial gainful activity (SGA) test or the trial work period.

However, if you are using work incentives like the Plan to Achieve Self-Support (PASS) or the Impairment Related Work Expenses (IRWE) deduction, those reduce your countable income for SSDI purposes but do not affect your tax credits. A PASS allows you to set aside income and resources to reach a work goal without losing benefits. An IRWE deduction removes certain work-related expenses from your countable income. Neither of these affects your tax return or your may be able to access for tax credits.

If you are receiving Medicaid or SSI in addition to SSDI, tax refunds may count as a resource for SSI purposes. SSI has a $2,000 resource limit for single individuals. A large tax refund could push you over that limit and cause you to lose SSI for a month. If this is a concern, contact your local SSI office before filing to understand how a refund would affect your case.

Frequently Asked Questions

Do I have to file a tax return if I only receive SSDI and no other income?

No. If SSDI is your only income, you have no filing requirement and will owe no tax. However, if you have any earned income (wages or self-employment), you should file to claim the EITC, even if you owe no tax, because the EITC is refundable and you may receive money back.

Can I claim the Credit for the Elderly and Disabled if I am on SSDI?

Yes, if you are under 65 and your SSDI award letter or medical evidence shows you are permanently and totally disabled. Your income (excluding SSDI) must be below $17,500 (single) or $21,250 (married filing jointly). Contact the IRS or a tax professional if you are unsure whether your disability meets the tax definition.

What happens if I claim a tax credit I am not may have access to to?

The IRS will review your return and either deny the credit or request documentation (such as your SSDI award letter or childcare provider's tax ID). If you claimed the credit in error, you will owe back the amount, plus interest. If the error was unintentional, penalties are usually waived. Always keep records of income, expenses, and dependent information to support your claims.

Can my tax refund be taken to pay back overpayment of SSDI?

Yes. If the Social Security Administration determines you were overpaid SSDI in a prior year, they can request the Treasury Department to offset your federal tax refund to recover the debt. You will receive notice of the offset before it happens. You can request a hearing to dispute the overpayment, but the offset may proceed while your appeal is pending.

Do I need to report my tax refund to Social Security?

No. Tax refunds are not counted as income for SSDI purposes and do not affect your benefits. However, if you receive SSI in addition to SSDI, a large refund may count as a resource and could affect your SSI payment for that month. Contact your SSI office if you expect a refund over $2,000.