Wheeling through the tax maze.
I wrote Tax Options and Strategies: A State-by-State Guide for Persons With Disabilities, Senior Citizens, Veterans and Their Families as a result of my experiences during the past few years. I coordinated a state study of the needs of people with head- and spinal-cord injuries, prepared a state health and human services directory, and enjoyed friendships with senior citizens and people with disabilities. I became fascinated with state tax policy for these populations. As my work progressed, I also found many interesting benefits for veterans and their families.
Most people were not aware of the benefits available to them. Often they did not have the persistence or the patience to find the keys to tax relief. In addition, programs were difficult to understand - especially those regarding tax policy. The complexity of the tax system and the maze of governmental bureaucracy intimidated people. My book and this article attempt to help people access the many benefits available nationwide.
After considerable research and effort, a friend of mine, who has paraplegia, discovered that South Carolina offers total property-tax exemption for completely and permanently disabled service-connected veterans - and for those who have paraplegia or quadriplegia and their surviving spouses. Property tax is also exempted for one automobile. These are just two examples of the types of benefits available throughout the nation.
This article covers important topics that may help you access benefits. I would like to stress, however, that if you have specific questions for your state, you probably should talk with a tax specialist in your area.
Many sources offer information on federal income tax. To save on taxes consider deductions, credit for people who are elderly or disabled, earned income credit, and medical deductions.
* Deductions. Additional deductions are available for people who are age 65 and older or who are blind. Major areas for others include medical and dental expenses, state and local income taxes, property taxes on homes, personal property taxes on cars or boats, deductible home-mortgage interest, charitable cash contributions, moving expenses, other expenses for investments, tax preparation, safe deposit box rental, etc.
* Credit for Elderly and Disabled. The credit is based on your filing status, age, and income. If you are married and filing a joint return, it is also based on your spouse's income. Specifics concerning eligibility, definitions for disability, and income limits for individuals and couples filing jointly are found in my book or in the Internal Revenue Service's Publication 524: Credit for the Elderly or the Disabled.
* Earned Income Credit. The primary purpose of this credit is to provide tax benefits to families who work but have low incomes. People with disabilities are generally ineligible, specifically if they are totally and permanently disabled. Some families who are wage earners with low incomes and who have elderly or disabled family members may qualify for the Earned Income Credit. For detailed information, consult IRS's Publication 596: Earned Income Credit.
* Medical Deductions. Medical and dental expenses are difficult for the average individual or couple to use because the current federal limit (7.5% of the Adjusted Gross Income [AGI], line 32) must be exceeded before the deduction may be claimed on federal income tax. In many cases, this is a significant amount of money and eliminates the possibility of a deduction. However, people with high medical and dental expenses and/or low income may be eligible for tax relief. When reviewing your medical expenses, consult IRS's Publication 502: Medical and Dental Expenses.
People with disabilities who use wheelchairs can consider the following expenses: wheelchairs and their upkeep, capital expenses to homes or apartments for special equipment and its upkeep or improvements (if their main purpose is medical care), and modifications to vehicles used to go to and from employment.
STATE AND LOCAL EXEMPTIONS
A number of states do not assess income taxes. Those who do, offer special deductions or exemptions for individuals and families who meet certain conditions. People with disabilities should carefully review their state income-tax instructions for these deductions or exemptions.
* Homestead Programs. Many state and local governments offer various forms of tax relief through homestead-exemption programs. Depending on your location, either state or local governments finance such tax-exemption programs. These normally relate to owner-occupied homes or mobile homes and are available to homeowners, senior citizens, people with disabilities, veterans and their spouses, and other select groups. Some states offer these exemptions to those who have spouses in nursing homes or who can show they are maintaining spouses at home rather than placing them in nursing homes. Local governments often provide higher exemptions than required by state law. These homestead exemption-programs operate by subtracting a specified dollar amount from the assessed valuation of the property before computing the tax liability. These exemptions can amount to significant savings. Many states offer total exemptions for people who are totally and permanently disabled.
* Tax Credit and Circuit Breaker Programs. Other major forms of tax relief are known as "circuit breaker" or tax-credit programs. These are for homeowners and renters and are financed by the states. Property-tax relief is targeted to specific groups, primarily senior citizens, people with disabilities, and low-income households. Most of these programs target lower-income groups and take the form of state income-tax credits: direct payments to qualified individuals, or a state payment to the local government that lost tax revenue. Amounts vary according to income; lower-income families or individuals receive larger tax credits or rebates.
* Personal Property Tax Exemptions and Other Programs. In some states, local governmental units tax personal property such as automobiles. Other states provide tax relief through personal-property exemption programs. Most of these relate to exemptions for property tax on automobiles when individuals are disabled. In most instances, the exemptions are total. Once established, they often continue as long as the disabling condition exists. The exemptions may continue for widowed spouses who have not remarried and, in some cases, for minor children.
* Sales Taxes. Many states exempt food, drugs, and medical prostheses and equipment. If you have serious medical problems or disabilities, you may find it advantageous to live in particular states or purchase major-expense items in those that do not have sales taxes on medicine and medical prostheses and equipment. However, take care to see whether you must pay "use taxes" for purchase of major items such as power wheelchairs.
I did not attempt to survey local-government programs. The research effort would have been too difficult, as state policies vary, but many valuable benefits are available.
When checking tax benefits on state and local levels, be persistent - don't give up until you are sure no help currently exists for you and your family in your area.
When you work with federal, state, or local tax authorities, proper documentation is extremely important. Failure to provide this will likely result in the loss or disallowance of deductions, exemptions, etc. If these are initially allowed, reversals could occur as the result of an audit, and you may also incur penalties. Therefore, read instructions carefully, save the necessary documents for the required length of time, keep good records (checks, receipts, descriptions of contributions, expenses, losses, etc.), and when in doubt, consult a tax specialist.
KEEP GOOD RECORDS
To itemize, you need the following information: * Medical and dental expenses * State and local income taxes paid * Property taxes on your home * Other taxes (i.e., personal property taxes on car, boat, etc.) * Deductible home-mortgage interest * Charitable cash contributions * Contributions other than cash * Car-theft losses * Moving expenses * Unreimbursed employee expenses * Expenses related to investments, tax preparation, safe deposit boxes, etc.
Taxpayer-benefit information is available from the following sources: * The Internal Revenue Service * State offices on aging * Area agencies or councils on aging * State offices that assist people with disabilities * State and federal offices on veteran's affairs * Local or county tax administrator's offices
ABOUT THE AUTHOR
Bruce Bondo is director of Research and Policy Analysis with the South Carolina Department of Health and Human Services in Columbia, S.C. He holds a bachelor of arts degree in political science/public administration from the University of Wisconsin and earned a master's degree in public administration at the University of North Carolina. He has more than 20 years' experience in health and human services administration, public finance, and policy analysis. Comments in this article reflect his research and private opinions but do not in any way represent his employer.
Tax Options and Strategies: A State-by-State Guide for Persons With Disabilities, Senior Citizens, Veterans, and Their Families is available for $19.95 (plus $4 for shipping and handling) from Demos Vermande, 386 Park Avenue South, Suite 201, New York, NY 10016. (800) 532-8663 / (212) 683-0072.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||includes related information; how to find tax benefits|
|Author:||Bondo, Bruce E.|
|Publication:||PN - Paraplegia News|
|Date:||Dec 1, 1995|
|Previous Article:||Medical update: PVA's Research and Education Department keeps you up-to-date with the latest in medical treatment and scientific breakthroughs.|
|Next Article:||Four-wheelin' fun.|