Updated and reviewed in 2024 by Ken Shulman, of Counsel at Day Pitney, LLP.
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With tax season upon us, here are 5 things you should know about the different tax credits for a child with a disability– plus the deductions and liabilities affecting families with children and adult dependents with disabilities.
1. Who can I claim as a dependent?
You can claim a person with disabilities as a dependent when:
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They have lived with you for more than half of the tax year.
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You have provided at least half of their support for the tax year.
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They are either your: child, stepchild, foster child, or a descendant of these.
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They are your brother, sister, stepsibling, father, mother, grandparent or other direct ancestor.
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They are not filing a tax return of their own.
2. What tax credits are there if I have a child or a dependent with disabilities?
Depending on your child’s age and income, and your personal income, you may be able to claim the following:
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Child tax credit – Available for each qualifying child who will be under the age of 17 at the end of 2023. This credit is a total of $2,000 for each qualifying child for 2023.
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Other dependent tax credit— For dependents, other qualifying relatives, and even qualified dependents who are not related to the taxpayer, age 17 and older (including parents/grandparents), a credit of $500 may be available.
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Child and dependent care tax credit – – For expenses incurred so that parents can work or look for work. Married people must both work, or one must work while the other is a full-time student, has a disability, or is looking for work (provided that the spouse looking for work has earnings during the year). This credit equals up to 50% of childcare expenses, limited to $8,000 for the care of one child and $16,000 for two or more qualifying persons.
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Qualified retirement savings contributions credit-For contributions to ABLE accounts by designated beneficiaries.
3. What about medical deductions and taxes?
Medical deductions can be considered for both the person with a disability and the people claiming that person as a dependent. These may include:
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Unreimbursed health care expenses
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Special schooling, training, or therapy
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Travel expenses to and from medical and therapy appointments
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Education aides
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Diagnostic evaluations
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Home improvements and/or modifications
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Cost of following special medically recommended diets
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Medically recommended conferences and seminars
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Genetic testing (related to a medical condition)
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Removal of lead paint
4. What if I’m filing for myself?
If you are an adult with disabilities filing taxes for yourself, here are 2 important considerations:
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Impairment-Related Work Expenses deduction – These are business expenses that are necessary for you to be able to work. These expenses are deductible only if you have a physical or intellectual disability that is a functional limitation to employment or that substantially limits one or more major life activities such as walking, speaking, and performing manual tasks.
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Elderly and disabled tax credit – Available to every U.S. citizen, who has reached age 65 during the tax year or those under 65 who are retired on permanent and total disability, and received taxable disability income in 2023. You may be eligible for this credit in the amount of $5000 to $7,500 depending on your circumstances.
5. What else should I think about?
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IRC section 529 plans– Although considered college savings plans; these have been expanded for use for certain K-12 tuition and expenses as well as qualified apprenticeships in the trades. Plus, the cost of certain services used by some children with disabilities is considered a qualified higher education expense for 529 college savings plans.
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ABLE Accounts– The Achieving a Better Life Experience (ABLE) Act of 2014 allows states to create tax-advantaged savings programs for eligible people with disabilities (also known as designated beneficiaries). Contributions to ABLE accounts can help designated beneficiaries save for qualified disability expenses. Distributions are tax-free if used for qualified disability expenses.
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Special needs trusts (SNTs) and Health Savings Accounts (HSAs) are important financial and tax planning tools that can significantly contribute to a person’s quality of life. It is important to understand the opportunities that each of these provides.
*This overview is not intended as tax advice. People with disabilities and their families should consult a tax professional about their specific circumstances.
Learn more about tax credits and other financial considerations if you have a child with a disability:
- SSI Benefits and other financial resources for your child
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ABLE Accounts: an important part of financial planning for a child with a disability
- Financial help for parents of a child with a disability
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Tax help for people with disabilities – from Benefits.gov
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Living and Working with Disabilities: Tax benefits and credits – from the IRS
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IRS Volunteer Income Tax Assistance (VITA) – Local sites offer free tax return preparation to those with low to moderate income. Call 1-800-906-9887 for a VITA site near you, or go to the VITA Locator Tool.
