- Publication 907 - Introductory Material
- Publication 907 - Main Content
- Dependent Care Benefits
- Social Security and Railroad Retirement Benefits
- Disability Pensions
- Military and Government Disability Pensions
- Other Payments
- Itemized Deductions
- Tax Credits
- Child and Dependent Care Credit
- Credit for the Elderly or the Disabled
- Earned Income Credit
- Credit for Qualified Retirement Savings Contribution
- Household Employers
- Business Tax Incentives
- ABLE Account
- Who can establish an ABLE account and what are the requirements?
- Loss of eligible individual status.
- Contribution limitation.
- What if amounts contributed to your ABLE account are greater than the annual contribution limit?
- What if your ABLE account exceeds the cumulative limit?
- Rollovers, program-to-program transfers, and beneficiary changes.
- Program-to-program transfer.
- Change of designated beneficiary.
- Rollover from section 529 tuition account to section 529A ABLE account.
- Information returns for ABLE accounts.
- Form 1099-QA, Distributions From ABLE Accounts.
- Form 5498-QA, ABLE Account Contribution Information.
- How To Get Tax Help
- Tax reform.
- Preparing and filing your tax return.
- Getting tax forms and publications.
- Access your online account (individual taxpayers only).
- Using direct deposit.
- Refund timing for returns claiming certain credits.
- Getting a transcript or copy of a return.
- Using online tools to help prepare your return.
- Resolving tax-related identity theft issues.
- Checking on the status of your refund.
- Making a tax payment.
- What if I cant pay now?
- Checking the status of an amended return.
- Understanding an IRS notice or letter.
- Contacting your local IRS office.
- Watching IRS videos.
- Getting tax information in other languages.
- The Taxpayer Advocate Service (TAS) Is Here To Help You
- Low Income Taxpayer Clinics (LITCs)
Publication 907 (2018), Tax Highlights for Persons With Disabilities
For use in preparing 2018 Returns
For the latest information about developments related to Pub. 907, such as legislation enacted after this publication was published, go to IRS.gov/Pub907.
2019 ABLE account changes on IRS.gov. This publication is for use in preparing your 2018 returns. For changes affecting your 2019 return, such as the contribution limit, go to IRS.gov/Pub907 for those updates.
Annual contribution limit. For 2018, the maximum amount that can be contributed to your ABLE account is increased to $15,000. See Contribution limitation , later.
Credit for qualified retirement savings contributions (saver’s credit). Beginning with 2018, you may qualify for the credit for qualified retirement savings contributions (also known as the saver’s credit) based on contributions you make to your ABLE account. The credit can reduce the amount of tax you owe or increase your refund. See Credit for Qualified Retirement Savings Contribution , later. Also, see Form 8880, Credit for Qualified Retirement Savings Contributions.
An ABLE account. The Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE) was enacted to help blind or disabled people save money in a tax-favored ABLE account to maintain health, independence, and quality of life. Compare ABLE programs on the websites of state governments to see which program is best suited for you. See ABLE Account , later.
My Social Security account. Social security beneficiaries can obtain helpful information from the Social Security Administration's website with a my Social Security account. See Social Security and Railroad Retirement Benefits , later.
This publication concerns people with disabilities and those who care for them. It includes highlights about:
Business tax incentives, and
You will find most of the information you need to complete your tax return in its instructions.
See How To Get Tax Help at the end of this publication for information about getting publications, forms, and free tax services.
All income is taxable unless it is specifically excluded by law. The following discussions highlight some taxable and nontaxable income items. For information about distributions from an ABLE account, see ABLE Account , later.
Dependent care benefits include the following.
Amounts your employer paid directly to you or your care provider for the care of your qualifying person(s) while you worked.
The fair market value of care in a daycare facility provided or sponsored by your employer.
Pre-tax contributions you made under a dependent care flexible spending arrangement.
For information about excluding benefits on Form 1040 or Form 1040NR, see Form 2441 and its instructions.
For more information and to set up an account, go to SocialSecurity.gov/MyAccount.
If you received social security or equivalent Tier 1 railroad retirement (RRTA) benefits during the year, part of the amount you received may be taxable.
If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 1 of Form 1040 until you reach minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled.
You may be entitled to a tax credit if you were permanently and totally disabled when you retired. See Pub. 524, Credit for the Elderly or the Disabled.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Report the payments on Form 1040, lines 4a and 4b. See Pub. 575, Pension and Annuity Income.
See Pub. 525, Taxable and Nontaxable Income.
Generally, you must report disability pensions as income, but do not include certain military and government disability pensions. See Pub. 525.
You may receive other payments that are related to your disability. The following payments are not taxable.
Benefit payments from a public welfare fund, such as payments due to blindness.
Workers' compensation for an occupational sickness or injury if paid under a workers' compensation act or similar law.
Compensatory (but not punitive) damages for physical injury or physical sickness.
Disability benefits under a "no-fault" car insurance policy for loss of income or earning capacity as a result of injuries.
Compensation for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement.
Long-term care insurance contracts generally are treated as accident and health insurance contracts. Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. See Pub. 525.
You can exclude from income accelerated death benefits you receive on the life of an insured individual if certain requirements are met. Accelerated death benefits are amounts received under a life insurance contract before the death of the insured. These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. This exclusion applies only if the insured was a terminally ill individual or a chronically ill individual. See Pub. 525.
If you file Form 1040, to lower your taxable income you generally can claim the standard deduction or itemize your deductions, such as medical expenses, using Schedule A (Form 1040). For impairment-related work expenses, use the appropriate business form (1040 Schedules C, C-EZ, E, and F; Form 2106, Employee Business Expenses).
When figuring your deduction for medical expenses, you can generally include medical and dental expenses you pay for yourself, your spouse, and your dependents.
Medical expenses are the cost of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies, diagnostic devices, and transportation for needed medical care and payments for medical insurance.
You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income shown on Form 1040, line 7.
The following list highlights some of the medical expenses you can include in figuring your medical expense deduction.
Artificial limbs, contact lenses, eyeglasses, and hearing aids.
The part of the cost of Braille books and magazines that is more than the price of regular printed editions.
Cost and repair of special telephone equipment for hearing-impaired persons.
Cost of a wheelchair used mainly for the relief of sickness or disability, and not just to provide transportation to and from work. The cost of operating and maintaining the wheelchair is also a medical expense.
Cost and care of a guide dog or other animal aiding a person with a physical disability.
Costs for a school that furnishes special education if a principal reason for using the school is its resources for relieving a mental or physical disability. This includes the cost of teaching Braille and lip reading and the cost of remedial language training to correct a condition caused by a birth defect.
Premiums for qualified long-term care insurance, up to certain amounts.
Improvements to a home that do not increase its value if the main purpose is medical care. An example is constructing entrance or exit ramps.
Improvements that increase a home's value, if the main purpose is medical care, may be partly included as a medical expense. See Pub. 502, Medical and Dental Expenses.
If you are disabled, you can take a business deduction for expenses that are necessary for you to be able to work. If you take a business deduction for these impairment-related work expenses, they are not subject to the 7.5% limit that applies to medical expenses.
You are disabled if you have:
A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed; or
A physical or mental impairment (including, but not limited to, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working.
See Pub. 502.
This discussion highlights four tax credits which may lower your tax due and may be refundable.
If you pay someone to care for your dependent under age 13 or your spouse or dependent who is not able to care for themselves, you may be able to get a credit of up to 35% of your expenses. To qualify, you must pay these expenses so you can work or look for work. The care must be provided for:
Your qualifying child who is your dependent and who was under age 13 when the care was provided;
Your spouse who was not physically or mentally able to care for themselves and lived with you for more than half the year; or
A person who was not physically or mentally able to care for themselves, lived with you for more than half the year, and either:
Was your dependent, or
Would have been your dependent except that:
He or she received gross income of $4,150 or more,
He or she filed a joint return, or
You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2018 return.
You can claim the credit on Form 1040. You figure the credit on Form 2441.
For more information, see the instructions for Schedule 3 (Form 1040), line 49, and Pub. 503, Child and Dependent Care Expenses.
You may be able to claim this credit if you are a U.S. citizen or a resident alien and either of the following applies.
You were 65 or older at the end of 2018.
You were under 65 at the end of 2018, and retired on permanent or total disability.
You can claim the credit on Form 1040. You figure the credit on Schedule R, Credit for the Elderly or the Disabled.
For more information, see the instructions for Schedule 3 (Form 1040), line 54, and Pub. 524, Credit for the Elderly or the Disabled.
This credit is for people who work and have a qualifying child or who meet other qualifications. You can get the credit if your adjusted gross income for 2018 is less than:
$15,270 ($20,950 for married filing jointly) if you do not have a qualifying child,
$40,320 ($46,010 for married filing jointly) if you have one qualifying child,
$45,802 ($51,492 for married filing jointly) if you have two qualifying children, or
$49,194 ($54,884 for married filing jointly) if you have three or more qualifying children.
To figure the credit, use the worksheet in the instructions for Form 1040. If you have a qualifying child, also complete Schedule EIC, Earned Income Credit, and attach it to your Form 1040.
You may be able to claim the credit for qualified savings contributions (also known as the saver’s credit) of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to your ABLE account. This is a nonrefundable credit, which means the amount of the credit in any year can’t be more than your tax that you would otherwise pay (not counting any refundable credits) for any tax year. If your tax liability is reduced to zero because of other nonrefundable credits, such as the credit for child and dependent care expenses, then you won’t be entitled to this credit.
If you pay someone to work in your home, such as a babysitter or housekeeper, you may be a household employer who has to pay employment taxes.
A person you hire through an agency is not your employee if the agency controls what work is done and how it is done. This control could include setting the fee, requiring regular reports, and providing rules of conduct and appearance. In this case, you do not have to pay employment taxes on the amount you pay. But if you control what work is done and how it is done, the worker is your employee. If you possess the right to discharge a worker, that worker is generally considered to be your employee. If a worker is your employee, it does not matter that you hired the worker through an agency or from a list provided by an agency.
To find out if you have to pay employment taxes, see Pub. 926, Household Employer's Tax Guide.
If you own or operate a business, or you are looking for work, you should be aware of the following tax incentives for businesses to help persons with disabilities.
Deduction for costs of removing barriers to the disabled and the elderly—This is a deduction a business can take for making a facility or public transportation vehicle more accessible to and usable by persons who are disabled or elderly. See chapter 7 of Pub. 535, Business Expenses.
Disabled access credit—This is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons with disabilities. The expenses must be to enable the eligible small business to comply with the Americans With Disabilities Act of 1990. See Form 8826, Disabled Access Credit.
Work opportunity credit—This credit provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs. One targeted group consists of vocational rehabilitation referrals. These are individuals who have a physical or mental disability that results in a substantial handicap to employment. See Form 5884, Work Opportunity Credit.
If you have any questions about the amounts on these forms, you should contact your ABLE program administrator.
If you have questions about a tax issue, need help preparing your tax return, or want to download free publications, forms, or instructions, go to IRS.gov and find resources that can help you right away.
Getting answers to your tax questions. On IRS.gov, get answers to your tax questions anytime, anywhere.
Go to IRS.gov/Help for a variety of tools that will help you get answers to some of the most common tax questions.
Go to IRS.gov/ITA for the Interactive Tax Assistant, a tool that will ask you questions on a number of tax law topics and provide answers. You can print the entire interview and the final response for your records.
Go to IRS.gov/Pub17 to get Pub. 17, Your Federal Income Tax for Individuals, which features details on tax-saving opportunities, 2018 tax changes, and thousands of interactive links to help you find answers to your questions. View it online in HTML, as a PDF, or download it to your mobile device as an eBook.
You may also be able to access tax law information in your electronic filing software.
TAS is an independent organization within the IRS that helps taxpayers and protects taxpayer rights. Their job is to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights.
The Taxpayer Bill of Rights describes 10 basic rights that all taxpayers have when dealing with the IRS. Go to TaxpayerAdvocate.IRS.gov to help you understand what these rights mean to you and how they apply. These are your rights. Know them. Use them.
TAS can help you resolve problems that you can’t resolve with the IRS. And their service is free. If you qualify for their assistance, you will be assigned to one advocate who will work with you throughout the process and will do everything possible to resolve your issue. TAS can help you if:
Your problem is causing financial difficulty for you, your family, or your business;
You face (or your business is facing) an immediate threat of adverse action; or
You’ve tried repeatedly to contact the IRS but no one has responded, or the IRS hasn’t responded by the date promised.
TAS has offices in every state, the District of Columbia, and Puerto Rico. Your local advocate’s number is in your local directory and at TaxpayerAdvocate.IRS.gov/Contact-Us. You can also call them at 877-777-4778.
TAS works to resolve large-scale problems that affect many taxpayers. If you know of one of these broad issues, please report it to them at IRS.gov/SAMS.
TAS also has a website, Tax Reform Changes, which shows you how the new tax law may change your future tax filings and helps you plan for these changes. The information is categorized by tax topic in the order of the IRS Form 1040. Go to TaxChanges.us for more information.
LITCs are independent from the IRS. LITCs represent individuals whose income is below a certain level and need to resolve tax problems with the IRS, such as audits, appeals, and tax collection disputes. In addition, clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Services are offered for free or a small fee. To find a clinic near you, visit TaxpayerAdvocate.IRS.gov/LITCmap or see IRS Pub. 4134, Low Income Taxpayer Clinic List.
- Exclusion from income
- Employer-provided dependent care benefits, Exclusion or deduction.
- Form W-2
- Dependent care benefits, Statement for employee.
- Identity theft, Resolving tax-related identity theft issues.
- Impairment-related work expenses
- Definition, Impairment-related expenses defined.
- Impairment–related work expenses, Impairment-Related Work Expenses
- Income, Income
- Compensation for permanent loss or disfigurement, Other Payments
- Dependent care assistance, Dependent Care Benefits
- Disability pensions, Disability Pensions
- Long-term care insurance, Long-Term Care Insurance
- Military and government disability pensions, Military and Government Disability Pensions
- No-fault car insurance policy disability benefits, Other Payments
- Physical injury or sickness damages, Other Payments
- Social security and railroad retirement benefits, Social Security and Railroad Retirement Benefits
- Supplemental security income (SSI) payments, Supplemental security income (SSI) payments.
- VA disability benefits, VA disability benefits.
- Welfare fund benefits, Other Payments
- Workers compensation, Other Payments
- Itemized deductions, Itemized Deductions
- Long-term care insurance, Long-Term Care Insurance
- No-fault car insurance policy disability benefits, Other Payments
- VA disability benefits, VA disability benefits.