TurboTax / Tax Calculators & Tips / All Tax Guides / Family / Tax Tips for Caring for a Disabled Spouse

Tax Tips for Caring for a Disabled Spouse

Updated for Tax Year 2015


OVERVIEW

Caring for a disabled spouse can be a financial strain, but you do have opportunities to reduce the burden. "There are many tax credits and other tax breaks available for disabled individuals and their caretakers," says Mathew Dahlberg, a financial advisor with 111th Street Investments in Kansas City. Among the most common are the tax credit for the elderly or disabled, the child or dependent care credit, and the medical expenses deduction.


Taxable and non-taxable disability

If your spouse is receiving disability payments, it's important for tax planning purposes to understand the source of the payments to help determine whether those benefits are truly taxable. Some examples of taxable and non-taxable benefits include:

tax tips for caring for a disabled spouse

Taxable
• Disability benefits from an employer, much like wages from that employer
• Benefits from a disability insurance policy that was paid for by an employer
• When the cost of a disability policy's premiums is split between an employer and an employee, any benefits attributable to the employer's portion of the premiums or paid using pre-tax dollars
• Social Security disability income, depending on the amount of ‘other’ income an individual earns

Non-Taxable
• Benefits from a disability insurance policy that you paid the premiums using after-tax money
• Veterans disability benefits

Credit for care expenses
If you pay someone to provide care for your disabled spouse, such as a live-in nurse or aide, you might be eligible for the tax credit for child and dependent care expenses. This is the same credit that working parents claim when they pay for child care. Though you cannot actually claim your spouse as a dependent on your tax return, you can treat him or her like one to claim this credit if your situation meets the following conditions:
• Your spouse is physically or mentally incapable of caring for himself or herself 
• Your spouse lived with you for at least half of the year 
• You paid someone to care for your spouse so that you could work or look for work
• You had earned income from an employer for services

The amount of your tax credit depends on several factors, including your total earned income, how much you paid for care, and whether you are also paying for child care or care for another dependent. However, unlike many other tax breaks, this one doesn't have an upper income limit. Those with higher-income may get a smaller credit than those who earn a lower-income with the same expenses, but they still get something.

Disability tax credit

People who are unable to work and are receiving disability payments might also qualify for a tax break called the credit for the elderly and disabled. Your spouse could qualify for this credit if all of the following apply:

• Your spouse retired from his or her job on "permanent and total disability"
• Your spouse received taxable disability benefits from a former employer or from an insurance policy provided by that employer
• Your spouse was younger than the employer's mandatory retirement age (if it has one)
• Your spouse's income was not above certain limits 

The term "permanent and total disability" is a disability that meets these criteria:

• Your spouse cannot work because of his or her condition 
• A doctor has certified that your spouse's condition will last for at least 12 months or is terminal

You claim this credit -- and figure out how much your credit is -- by filing Schedule R with your tax return. When you use TurboTax, we ask you simple questions and fill in the right forms for you.

Medical expenses deduction

Caring for someone with a disability often means significant ongoing costs, such as for doctor visits, medication, therapy or mobility equipment, or modifications to your home, like a wheelchair ramp. Depending on your situation, you might be able to claim a tax deduction for a portion of your family's medical expenses. Deductions reduce your income, and therefore the amount of tax you owe. The rules for deducting medical expenses are as follows:

• Your costs must fit the IRS definition of qualifying medical expenses. The definition is fairly broad. IRS Publication 502 provides information on many common expenses.
• You can deduct only the portion of your expenses that exceed 10% of your income. If you have gross income of $50,000, for example, the first $5,000 of expenses ($50,000 x 10% = $5,000) would not be deductible. If you or your spouse are over 65, the 10% limit drops to 7.5% ($50,000 x 7.5% = $3,750) through 2016.
• You can't deduct any expenses that were reimbursed by an insurance company or someone else

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Filing Deadline: IRS filing deadline for tax year 2015 is April 18, 2016 (except for residents of Massachusetts or Maine, where the IRS filing deadline for tax year 2015 is April 19, 2016).
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except the TurboTax Home & Business/QuickBooks Self-Employed bundle offers.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.