The disability tax credit is available to those with severe mental or physical disabilities in the US who are under retirement age and receive disability payments. Eligibility depends on income level, non-taxable benefits, and marital status, and the credit is applied against taxes owed or refunded if larger. The disability must prevent substantial gainful activity for 12 months.
A disability tax credit is a tax credit granted to a person with some type of severe mental or physical disability. In the United States, a person must be younger than the standard retirement age and receive disability payments from a former employer to receive the credit. The amount of the disability tax credit a person can claim depends on income level, the amount of non-taxable benefits, such as social security or pension payments, and the person’s marital status. Once a person is deemed eligible, the tax credit will be applied against the taxes owed, and if the credit is the larger amount, a tax refund is obtained.
Many people in the United States are eligible each year for various reasons to receive tax credits, which are compared to money owed to the United States Internal Revenue Service (IRS). The government is especially aware of the earnings problems experienced by people who have some form of disability that prevents them from working for a living. A disability tax credit can help ease the burden on those individuals.
It is important to understand what constitutes a disability that is considered eligible for a disability tax credit. The primary standard is that the disability, whether mental or physical, must prevent the individual from engaging in substantial gainful activity in the specified 12-month period for which taxes are taken. Substantial gainful activity includes any task that an individual may perform for pay. For example, an individual might perform simple household chores, but would qualify for the tax credit if he was unable to transport heavy equipment as required by his previous job.
Anyone under the age of 65 or below the specific retirement age for the profession in question that fits this description may be eligible for the disability tax credit in the United States. However, there are other qualifications that must be met. For example, an amount of gross income or nontaxable benefits, such as Social Security payments, that exceeds a certain level, would disqualify a person from the credit. Those levels depend on whether the person filing the return is married and whether the person files the return alone or with a spouse.
Once a person knows they are eligible for the tax disability tax credit, they can determine how much the credit will be worth. Again, this amount depends on the income levels and status of the person filing the return. If the person is eligible for the credit, it could result in a tax refund if the amount of the credit is more than the income tax due for that particular year. On the other hand, if the credit is less than the tax owed, it works as a deduction from the amount owed.
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