Posted on September 21, 2005 at 16:53:08:
The tax code offers some assistance for the disabled. For instance, workers’ compensation payments for a job-related injury are tax free. When it comes to long-term-disability insurance, tax treatment depends on who pays the insurance premiums: if the employer paid, the payments are taxable; if the worker paid, the benefits are tax free.
Someone who is totally or partially blind and does not itemize can claim an extra standard deduction of $1,250.
Disabled individuals who can’t work can tap into retirement accounts early without penalty. Those who can work can deduct those additional expenses that enable them to do a job. These are deducted on Schedule C or as a miscellaneous unreimbursed business expense, but not subject to the usual floor of 2 percent of AGI.
Long-term-care insurance benefits are tax-free to the disabled, up to $240 a day or $87,600 a year for 2005.