Do I Get an Extra Deduction for a Disabled Spouse?
The Internal Revenue Service, or IRS, doesn't allow you to claim any extra deductions because of a disabled spouse. However, when you file a joint return with your disabled spouse, you may qualify for a tax credit that can provide more tax savings than a deduction. However, the tax credit for the elderly and disabled has some requirements that you and your spouse must satisfy before claiming it.
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Disability Credit Requirements
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Your disabled spouse will qualify for the credit for the elderly and disabled if she is under the age of 65, retired on permanent and total disability and receives disability payments during the year that aren't tax-exempt. Furthermore, the IRS imposes varying income limitations each year which can preclude your spouse from claiming the credit when your joint income exceeds the threshold. Once your spouse reaches the age of 65, qualifying for the credit is easier since the elderly who are not on disability are eligible to claim it.
Taxable Disability Income
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Confusion about whether disability income a taxpayer receives is subject to tax or not is commonplace. Generally, any disability payment your spouse receives from a previous employer's disability plan or from private insurance will be subject to the federal income tax. If your spouse receives disability income from Social Security, a portion of those payments may be taxable if either of you have other significant sources of income in addition to the disability. However, if your spouse receives the disability payments from a branch of the military because the disability is the result of active duty, then those payments are tax-exempt.
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File Joint Return
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The only way that you can receive any tax benefit for your spouse's disability is if you file a joint return. In addition to being legally married to your spouse at the end of the tax, the IRS also requires that you both consent to the filing of a joint return. This is because married couples are not required to file joint returns; either spouse can choose to file separately. The downside to filing a joint return is that your income may render your spouse ineligible for the tax credit. However, if your spouse lives with you during the year and files a separate return, she is ineligible to claim the credit regardless of whether she satisfies the requirements or not.
Claiming the Credit
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In any year you and your spouse elect to claim the credit for the elderly and disabled, the IRS restricts your choice of tax forms. Since you cannot claim the credit if you file your tax return on a 1040EZ, you must choose between filing on Forms 1040 or 1040A. In addition, you must prepare a Schedule R and attach it to your joint tax return. The Schedule R walks you through various steps to calculate the precise amount of credit your spouse qualifies for.
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