Tax Credits and Deductions for People on Social Security Disability

People who receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) disability benefits may be entitled to a range of federal tax benefits, including deductions, income exclusions, and tax credits. Some of these credits are refundable, meaning they can put money directly in your pocket even if you owe no income taxes. Understanding what’s available can significantly reduce your tax bill or generate a refund you might not have known you were entitled to.

Tax Deductions for People With Disabilities

A tax deduction lowers the amount of your income that’s subject to tax. The value of a deduction depends on your tax bracket. In the 12% bracket, for example, a $1,000 deduction saves you $120 in taxes.

Impairment-Related Work Expenses

If you have a disability that limits your ability to work, you may be able to deduct disability-related work expenses from your income. These “impairment-related work expenses” (IRWEs) cover costs like assistive technology, specialized software, or other services or equipment you need specifically because of your disability in order to do your job.

For income tax purposes, employees can deduct IRWEs only if they itemize their deductions on Schedule A rather than taking the standard deduction. But if you’re self-employed, you can deduct these costs as business expenses on Schedule C, which reduces both your income taxes and your self-employment taxes. 

IRWEs also count toward Social Security’s determination of whether your work rises to the level of “substantial gainful activity” (SGA), which can affect your eligibility for disability benefits. (In 2026, SGA is $1,690 per month.)

Higher Standard Deduction for People Who Are Blind

If you have a qualifying vision impairment—generally, vision no better than 20/200 in the better eye, even with correction—the IRS allows an additional standard deduction on top of the regular amount. For the 2026 tax year, a single filer who is blind gets an extra $2,050; married filers each get an additional $1,650 per blind spouse.

Find out if you qualify for disability benefits.

Answer a few questions to see if you’re eligible.

Get a Free Evaluation

866-382-7872

Income Exclusions for Disability Benefits

An income exclusion is different from a deduction—it’s income you don’t have to report on your federal tax return at all.

SSI Income Isn’t Counted

All Supplemental Security Income (SSI) benefits are excluded from federal income entirely. If SSI is your only income, you will have no taxable income to report.

SSDI Is Partially Excluded

Social Security disability insurance (SSDI) benefits may be partly taxable, depending on your total income. In figuring the taxable amount, federal law allows you to exclude half of your SSDI benefits when you add up your income to come up with your “combined income.” (26 U.S.C. § 86.) The portion of your SSDI benefits that is taxable depends on whether your combined annual income is:

• below $25,000 (then 0% of your SSDI is taxable)
• between $25,000 and $34,000 (then up to 50% of your SSDI is taxable), or 
• above $34,000 (then up to 85% of your SSDI is taxable). 

For more information, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Many states also fully or partially exclude SSDI from state income taxes.

Early Retirement Withdrawals

Normally, withdrawing money from an IRA, 401(k), or similar retirement account before age 59½ triggers a 10% early withdrawal penalty on top of ordinary income taxes. Individuals who are permanently and totally disabled, however, are exempt from this penalty. This exception applies to IRAs, 401(k)s, SEP plans, SIMPLE IRAs, and SARSEP plans.

See IRS Publication 590-B, Distributions from Individual Retirement Arrangements, for details.

Tax Credits for People With Disabilities

Unlike deductions, which reduce your taxable income, tax credits reduce your actual tax bill dollar for dollar. Some credits are “refundable,” meaning you can receive them as a cash refund even if you owe no taxes; others are “nonrefundable,” meaning they can only reduce your tax liability to zero.

Child and Dependent Care Credit

If you pay a caregiver to care for a spouse or child with disabilities so that you can work, you may qualify for the child and dependent care credit. The same applies if you have an elderly parent as a financial dependent and you pay for their care. 

For the tax year 2026 and beyond, the credit covers 20% to 50% (depending on your income) of your qualifying caregiver expenses. But expenses are capped at $3,000 for one qualifying dependent (or $6,000 for two or more), so the maximum credit is actually only worth $1,500 (or $3,000 for two). (I.R.C. § 21(a), (c).)

This is a nonrefundable credit, so it won’t generate a tax refund on its own, but it can reduce what you owe.

Use IRS Form 2441 to calculate your credit. IRS Publication 503, Child and Dependent Care Expenses has full details.

Credit for the Elderly or the Disabled

Most disability recipients won’t qualify for the credit for the elderly or disabled. To be eligible, you need to have retired from work on permanent and total disability and be receiving taxable disability income from a former employer’s pension, accident, or health plan. In addition, your total income also needs to be very low. Eligibility also requires that a physician certify you’re unable to perform substantial gainful activity. 

See IRS Publication 524, Credit for the Elderly or the Disabled, and use Schedule R to calculate the credit.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is one of the most valuable credits available to low-income workers. If you or your spouse works while receiving disability benefits and you have earned income from wages or self-employment, you may qualify. (But note that SSI and SSDI payments don’t count as earned income.)

The EITC is fully refundable, meaning you can receive it as a cash refund even if you owe nothing in income tax. For instance, if you qualify for a $1,000 earned income tax credit and you don’t owe any taxes, you’ll get the whole $1,000 as a tax refund. (I.R.C. § 32.) The credit is larger for filers with qualifying children.

The IRS offers an EITC Assistant tool at irs.gov to help you figure out if you’re eligible. For more information, see IRS Publication 596, Earned Income Credit.

Free Tax Filing Help

Filing a tax return is required to claim any of these credits, even if you don’t owe taxes. Several programs offer free assistance:

• VITA (Volunteer Income Tax Assistance): Free tax help for people who earn about $70,000 or less, have a disability, or need language support. Find a site at irs.treasury.gov/freetaxprep or call 800-906-9887.
• Tax Counseling for the Elderly (TCE): Free filing help for those 60 and older, with no income limit. Use the AARP Tax-Aide Locator at aarp.org or call 888-227-7669 (January through April).

Don’t skip filing just because your income is low or tax-free. Refundable credits like the EITC can generate a cash refund even with no tax liability, making a return well worth the effort.