Topic:
VETERANS' AFFAIRS; TAX CREDITS; PROPERTY TAX; SALES TAX; TAX EXEMPTIONS; ELDERLY; INCOME TAX; HANDICAPPED;
Location:
HANDICAPPED; TAX EXEMPTIONS;

OLR Research Report


August 18, 2006

 

2006-R-0520

TAX BENEFITS FOR PEOPLE WITH DISABILITIES

 

By: Saul Spigel, Chief Analyst

You asked for a description of state and federal tax benefits available to people with disabilities, particularly property tax deductions.

SUMMARY

Low-income people with disabilities are eligible for several property tax benefits. The Circuit Breaker program is the principal benefit. It provides a 10% to 50% tax reduction, depending on income. Disabled veterans and people with visual impairments are eligible for additional exemptions.

Federal income tax law contains several benefits for people with disabilities. Supplemental Security Income (SSI), which many people with disabilities receive, and veterans' disability pension income are not subject to federal income tax. Federal law permits people with disabilities to deduct medical and disability-related work expenses when they determine their tax liability. And low-income people under age 65 who are retired on permanent and total disability may be able to claim a federal tax credit.

Connecticut does not provide any income tax deductions or credits specifically related to disabilities. Connecticut tax liability is based on federal adjusted gross income, which is the amount reported before individuals subtract medical and other deductions or disability credits.

Various goods and services connected to disabilities are exempt from state sales tax. These include prostheses and wheelchairs; equipment installed in a motor vehicle for a physically disabled person; and landscaping and maintenance services, under some conditions.

PROPERTY TAX

Circuit Breaker

The Elderly and Disabled Homeowners' Tax Relief Program (known as the Circuit Breaker Program) provides a 10% to 50% state-reimbursed property tax reduction, depending on income, for low-income elderly and disabled homeowners. To qualify, a person with a disability must (1) submit proof of disability from the Social Security Administration, (2) own the home or have life tenancy in it and reside there, and (3) have an income below specified levels. Income limits for the program are adjusted annually to reflect Social Security benefit increases. The size of the credit a person receives depends on his income.

For program applications filed in 2006, the income limits and credits are shown in Table 1.

Table 1: Circuit Breaker Tax Credits and 2006 Income Limits

Income Level

Minimum Credit

Maximum Credit

Over

To

Married

Single

Married

Single

$0

$13,800

$400

$350

$1,250

$1,000

13,800

18,600

350

250

1,000

750

18,600

23,200

250

150

750

500

23,200

27,700

150

150

500

250

27,700

33,900

150

0

250

0

Applicants must apply for the credits with their town assessors between February 1 and May 15 of the year following the October 1 grand list for which they are seeking relief. Once approved, taxpayers must refile for benefits every two years (CGS 12-170aa, 12-170bb, and 12-170cc).

Tax Exemption

People who are permanently and totally disabled are eligible for a $1,000 property tax exemption. They can also receive an additional $1,000 exemption if the town in which they live adopts an ordinance to this effect. An applicant must be permanently and totally disabled and receiving Social Security disability benefits or disability benefits under a comparable government retirement program. He or she must provide the assessor's office with proof of total disability before October 1 to receive the exemption (CGS 12-81(55), -81i).

Veterans

All veterans can claim a $1,000 property tax exemption. Veterans with disabilities are eligible for a minimum $1,500 exemption and can receive up to $3,000 for a 75% or higher service-connected disability. Those with a severe, service-connected disability (e.g., paraplegic, hemiplegic, totally blind) can claim a $10,000 exemption on their home. Exemptions double if the veteran meets circuit breaker income limits (see above) (CGS 12-81 (20) (22), -81g).

People with Visual Impairment

People with blindness receive a $3,000 property tax exemption. Towns can grant them an additional $2,000 exemption if their income qualifies them for circuit breaker benefits (see above) (CGS 12-81(17), -81j).

FEDERAL INCOME TAX

Exemptions from Income

All income is taxable unless it is specifically excluded by law. SSI payments, which many people with disabilities receive, and Veterans Affairs disability pension income are excluded.

Deductions from Income

In determining their taxable income, people with disabilities (like all taxpayers) can deduct medical expenses that exceed 7.5% of their adjusted gross income. Medical expenses include payments made to diagnose, cure, mitigate, treat, or prevent a disease or treat any body part or bodily function. They also include transportation to medical care, health insurance payments, and the following costs, among others:

● Artificial limbs, eyeglasses, and hearing aids

● Special telephone equipment for people with hearing impairments

● Closed captioning equipment for televisions

● Wheelchair purchase and maintenance

● Guide animal acquisition and care

● Home improvements whose main purpose is medical care (e.g., a wheelchair ramp), as long as they do not increase the home's value

An employee with a physical or mental disability that functionally limits his employment or substantially limits one or more major life activities may be able to deduct impairment-related work expenses. These are allowable business expenses for attendant care at the workplace and other expenses necessary for the person to work.

Tax Credits

Low-income people under age 65 who are retired on permanent and total disability may be able to claim a tax credit. They must not have reached mandatory retirement age or have income above the thresholds displayed in Table 2.

Table 2: Income Limits for Disability Tax Credit

Filing Status

Adjusted Gross Income Threshold

Nontaxable Social Security or Pension Threshold

Single, head of household, widow(er) with dependent child

$17,500

$5,000

Married, filing joint return, and both spouses qualify

$25,000

$7,500

Married, filing joint return, but only one spouse qualifies

$20,000

$5,000

Married, filing separate return, and did not live with spouse during the year

$12,500

$3,750

Source: Internal Revenue Service (IRS), Publication 524

More detailed information on these federal tax benefits is available in these IRS publications:

Medical Expenses (Pub 502)

Credit for the Elderly and Disabled (Pub 524)

Taxable and Nontaxable Income (Pub 525)

SALES TAX

A variety of goods and services connected to disabilities are exempt from the sales tax. These include:

● Prostheses, hearing and vision aids, wheelchairs, canes, walkers (CGS 12-412(19)

● Telephone equipment designed exclusively for people with visual and hearing impairments (CGS 12-412 (38)

● Meals delivered to the home of people with disabilities (CGS 12-412 (46)

● Disposable pads for incontinency (CGS 12-412 (53)

● Equipment and associated repair and replacement parts installed in a motor vehicle for people with physical disabilities (CGS 12-412 (80)

● Landscaping, window cleaning, or maintenance services rendered at the home of people receiving total disability benefits from Social Security (CGS 12-412 (85)

SS:ts