Tax season is here again, and for those applying for Social Security Disability (SSD), understanding the tax implications is crucial. One common question that disability lawyers receive this time of year is, “Are attorney fees tax deductible for Social Security disability benefits?” The answer, in short, is yes. When you’re applying for SSD benefits, the cost of legal assistance can be part of your tax considerations.
These deductions are governed by specific IRS rules and can vary based on individual circumstances, making it essential to understand how they fit into the broader picture of your disability application process.
Other Items That Can Be Deducted During The Application Process
When you’re applying for Social Security Disability Insurance (SSDI) or dealing with long-term disability, tax season can bring up a lot of questions. It’s important to know about the different tax deductions that can help reduce your tax liability.
Medical Expenses:
Medical costs are a big part of living with a disability. If your medical expenses, like doctor visits, hospital fees, and prescriptions, are more than 7.5% of your adjusted gross income, you can deduct them from your tax return. This can be a big help, especially if you have ongoing medical needs.
Travel Expenses:
When you need to see doctors or go to the hospital, your travel costs, such as gas, bus fares, and parking fees, can add up. The good news is that these can be deducted. Just remember to keep a record of all these trips and costs.
Home Modifications:
If you have to make changes to your home because of your disability, like ramps or handrails, these expenses can be deducted. This makes it easier to afford the changes that make your home more accessible.
Special Equipment:
Equipment needed for your disability, like wheelchairs, hearing aids, or devices to help you communicate, can also be included in your deductions. These items are necessary for daily living and the IRS recognizes that.
Keep track of all these expenses. They can change your tax situation and lessen the financial burden during your SSDI application process.
Disability Tax Deductions: What Can Be Considered Once You’re Approved
After getting approved for disability benefits, there are different tax rules to consider:
Benefits Taxation:
Not all people with disabilities have to pay income taxes on their disability benefits. Whether your benefits are taxable depends on your income. If you’re filing jointly or have other income sources, you might have to pay taxes on part of your benefits.
Medical Deductions:
The medical expenses deduction still applies even after you’re approved for benefits. This is helpful if you continue to have high medical costs.
Disability Income Exclusions:
Some disability incomes, like certain Veterans Affairs (VA) disability benefits, aren’t taxed. This means you won’t include them in your taxable income, which is good news for your tax bill.
Considering Permanent and Total Disability:
If you have a permanent and total disability, there might be specific deductions or credits available. For example, if you’ve received a lump-sum SSDI payment, it’s important to understand how it affects your tax year. Some of these funds might be attributed to previous years and can impact your current tax return.
Understanding these deductions is crucial, but tax laws can be complex, especially when it comes to disability benefits and income. It’s often helpful to talk with a tax professional who knows about disability income and benefits. They can guide you on how to manage your tax return, considering your disability income and deductions.
Keeping accurate and detailed records is essential. It helps you and your tax professional figure out the best way to reduce your tax liability and take advantage of all possible deductions.
Can I Still Deduct Attorney Fees If I’m Denied For Disability Benefits?
Another common question that arises for many individuals applying for Social Security Disability Insurance (SSDI) is whether they can still deduct attorney fees on their tax return if their application for benefits is denied. The answer is not straightforward but important to understand.
It’s essential to know that attorney fees associated with the SSDI application process can be deductible, regardless of the outcome of your claim.
These fees fall under the umbrella of miscellaneous itemized deductions on your tax return. However, there are some additional considerations to be aware of:
Itemized Deductions: You must itemize your deductions to take advantage of this. This is crucial because if taking the standard deduction is more beneficial for your tax situation, you might not benefit from itemizing and claiming the attorney fees.
Documentation: Regardless of the outcome of your SSDI claim, maintaining detailed records of all attorney fees and related expenses is vital. This documentation will be necessary if you decide to itemize these costs on your tax return.
Seeking Professional Advice: Given the complexities of tax laws, especially when dealing with denied disability claims and associated costs, consulting a tax professional is highly advisable. They can provide personalized advice based on your specific financial situation and ensure you’re making the most beneficial decisions on your tax return.
Schedule A Case Consultation With The Law Office Of Gerard Lynch
Navigating the complexities of Social Security Disability, especially when it comes to legal fees and tax deductions, can be overwhelming. That’s where The Law Office of Gerard Lynch comes in.
We offer detailed guidance through every step of your SSD claim, including understanding the tax implications of your benefits and attorney fees. Schedule a free consultation with us today to ensure that you are making informed decisions and maximizing your benefits.
Let us help you ease the burdens of both your disability claim and tax season.
