Disability and qualifying for earned income tax credits

  Terry Katz & Associates  |  June 9, 2017  | Last modified on October 17th, 2018 | 

When individuals in New York and elsewhere are living with a disability due to an injury, illness or mental condition, it can be difficult. A disability could make it challenging to obtain and maintain gainful employment; thus, causing financial problems. In addition to applying for SSD benefits through the Social Security Administration, it is important that applicants consider other benefits and claims they might have for living with a debilitating injury, illness or condition.

When it comes to filing for taxes, those receiving disability benefits should note that they could qualify for earned income tax credits. The IRS considers those currently receiving SSD benefits to qualify as earned income until the recipient reached the minimum retirement age. This is the earliest age a person could receive his or her pension. Once an individual reaches that age, the IRS no longer considers the payments to be your pension and not earned income.

One should note that payments received through a disability insurance policy that required premium payments are not considered to be earned income. This is true no matter if a recipient has reached the minimum retirement age.

Children with disabilities could also qualify for earned income tax credits. In order to do so, the child’s Social Security number must be valid for employment and issued before the due date of the return. Additionally, the child must pass the age, relationship, residency, and joint return test. This means that the child must be your son, daughter, adopted son or daughter, stepchild, foster child, sibling, stepsibling, half-sibling or a descendant of any of them.

While there is no age limit and the child does not have to be younger than you, the child must not engage in any substantial gainful activity and a doctor must determine that the debilitating condition has lasted for 12 months, is expected to last 12 months or will result in their death.

Whether it is tax time or not, individuals often wonder how his or her disability could impact their tax filings and return. It is always important to understand your eligibility to claim earned income tax credits; thus, if you are currently receiving SSD benefits or applying for them, it is important to understand what you qualify for.

Source: Irs.gov, “Disability and Earned Income Tax Credit,” accessed June 4, 2017

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