Definition of 'Disabled'

• The IRS allows certain tax deductions and tax credits to "qualifying individuals" who are permanently and totally disabled. A qualifying individual is someone who "cannot engage in any substantial activity because of your physical or mental condition." The IRS requires that this assessment of a taxpayer is certified in writing by a physician. Further, the physician must state that the disability either has lasted or will continue to last for at least 12 months. In the case of an individual whose disability has lasted fewre than 12 months, he will still be considered a qualifying individual if the physician attests that his disability will most likely result in the the individual's death.
  
  

Qualifying Deductions and Exemptions

• As long as they meet the deduction's criteria, disabled individuals are entitled to any deduction that can be claimed by non-disabled individuals. This means they can deduct expenses like interest payments on mortgage loans. In addition, disabled individuals are entitled to a higher standard deduction than non-disabled taxpayers. They are allowed to exempt from their gross income disability-related revenue such as Veterans and Social Security payments. Insurance payments and court-awarded compensatory damages are also exempt from gross income.
  
  

Qualifying Credits

• As long as they meet the credit's criteria, disabled individuals are entitled to any credit that can be claimed by non-disabled individuals, for example, child-care credit. Most disabled individuals can qualify for the Earned Income Tax Credit that many non-disabled individuals cannot qualify for. Most importantly, disabled individuals are entitled to file Schedule R: Credit for the Elderly or the Disabled with their tax returns, which will provide additional tax relief.
  
  

Paying Tax

• Whether or not a disabled individual has to pay taxes is a function of the amount of her taxable income--if any--that remains after all deductions and credits she is entitled to have been included. If a disabled individual has a taxable income of $5 or more after reporting all gross income (and withheld from it certain disability-related income that is exempt), then subtracted all eligible deductions and credits, she must pay taxes to the U.S. Treasury.