The IRS sends out 8 billion pages of forms and instructions each year. Laid end to end, they'd stretch 28 times around the earth. To print them, 300,000 trees must come down.
Buried in that avalanche of information are many tax breaks for people with neurological disabilities.
No one knows this better than Armand Legault. For 33 years Legault worked for the Connecticut Department of Revenue Services as an audit supervisor, but his résumé tells only half the story. Since childhood he has had spinal muscular atrophy, a motor neuron disease similar to muscular dystrophy. Although he has never been able to walk and has only limited use of his hands, he rarely lets his condition slow him down.
If, as Albert Einstein once said, the hardest thing to understand is our income tax, then Armand Legault qualifies as a genius. Since retiring several years ago, he spends much time educating others with neurological disabilities as well as certified public accountants on the subject he knows best: tax breaks.
“I usually tell people to take it all off,” he laughs.
Here are specific deductions he covers in his disability-related tax seminars.
Ask Legault where the real money is and he doesn't hesitate: unreimbursed disability-related work expenses.
“CPAs know about the medical deduction, but this is much, much better,” he says.
If you can prove you need something to earn a living, he says, it's deductible. And unlike most business expenses, these are not capped at 2 percent of your adjusted income. “That means everything from paying a personal assistant to wake you up and help you get out the door each morning to outfitting a car so you can drive to work, and your mileage,” says Legault, who drives a customized van that has been specially equipped to accommodate his disability by responding to basic voice commands while he operates a joystick to accelerate, brake and make turns.
About two-thirds of states offer a break either on local property taxes or vehicle license fees for accessible and modified vehicles. That information is available from your state tax office. But even if you don't drive, the cost of hiring special transportation to get to work can be deducted.
Any other equipment that helps you work or get to work is also deductible. This can range from work equipment like an adapted workstation or modified computer keyboard to personalized living aids — for example, a lift, wheelchair, shower chair or BiPAP (Bilevel Positive Airway Pressure) ventilator.
“It's surprising that while medical expenses are extensively documented in IRS Publication 502, information about impairment-related work expenses is almost nonexistent,” says Ted Raffel, a Phoenix CPA specializing in tax returns for people with disabilities. “When I began working with disabled persons in my tax practice, I called the IRS Help Line for guidance about what is and is not an income-related work expense. There are inconsistent messages being given to callers. Hopefully, as the impairment-related work expense subject gets more visibility, the IRS will recognize the need to publish more specific guidelines on the subject.”
Because the deduction is so poorly defined in the tax code, Legault says it pays to be assertive with claimed deductions. Without clear definitions, even IRS auditors are at a loss. “It falls under a gray area in the tax code,” he says. “Having supervised tax auditors for years, I know that in the absence of strict definitions, it's possible to claim a deduction for any work-related expense. If your doctor says you need it or you can prove that you can't work without it, then claim it. You'll win if you're employed and can make the case you need something in order to work.”
If you need a live-in personal assistant, the tax code also offers allowances. Assistants come with their own deductions in addition to a tax credit, says Legault, who works closely with the Connecticut Association of Personal Assistants. An attendant's meals and many other expenses are legitimate deductions, as are any additional utility expenses and their percentage of the rent or mortgage payment.
Medical expenses may be the most obvious deduction, but not necessarily the most advantageous. In fact, William Perez, a San Francisco CPA and former IRS employee who runs the tax advice section on the about.com website, says claiming medical deductions tends to be one of the least advantageous tax strategies.
“Either people have a lot of medical expenses, or not enough,” Perez says. “For many taxpayers, itemizing medical expenses turns out to be an exercise in futility because of the 7.5-percent threshold and the standard deduction threshold.”
Out-of-pocket unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income are deductible provided they relate to the “diagnosis, cure, mitigation, treatment or prevention of disease.”
Someone with large medical bills, but not enough income to justify itemizing, should consider being claimed as a dependent by someone else, Perez advises. Someone over 24 who is considered “permanently and totally disabled” may be claimed as a dependent, regardless of income level. The taxpayer claiming a child, spouse or other neurologically disabled dependent — such as an elderly parent with Alzheimer's disease — will also be able to claim all the medical expenses.
If several adult children help care for the person, they must file a Multiple Support Agreement (Form 2120). This allows a family to designate which of the caregivers will claim the care recipient as a dependent.
The IRS also provides a tax credit for caregivers. To qualify for the dependant care credit, the recipient must be a child under 13 or someone who cannot take care of oneself, and care must be provided so that the taxpayer can work or look for work. “A credit is usually better than a medical deduction,” Legault says, “but everyone's situation is different.”
For basic deductions, start right next door. “Anything you have to buy that your neighbor doesn't, anything related to your disability, is usually deductible,” Legault says.
Home remodeling costs can be written off if the changes are directly related to a disability and don't increase a home's value, he says. These can include installing ramps or a chair lift, widening doors and hallways, lowering counters and cabinets, installing a roll-in shower, grading the exterior landscape to facilitate access, and adjusting electrical outlets and fixtures.
“If a CPA or tax person dismisses the deductions outright, I say just find another CPA,” Legault advises. “You won't find anyone at the IRS who will put it in writing either because it's such a gray area, but what is in writing is that there's no cap on work-related expenses if you're employed; and if you're self-employed, you can usually write off 100 percent of the cost of doing just about anything that helps you earn a living.”
Although most tax preparers will probably balk at signing off on a return that includes these deductions, Legault tells people to take matters into their own hands. “Do it yourself,” he advises. “And if you haven't claimed these deductions in the past, you can go back three years and file an amended return, provided you have all the paperwork to back it up.”
So the same advice applies to filing taxes as to missing school: always have a doctor's note. “The IRS has specific and strict requirements for deductions, so do your homework,” Legault says. “Make sure you have a physician's prescription that specifies the deducted expense is related to your health condition, and make sure you keep all receipts and other records of transactions to back up your claim.”