We all hear about the tax implications of a disaster, either
natural or man-made, but what about an accident? What are the tax implications
of an injury you might have?
If you are in an accident and have medical expenses, you may
be able to deduct your medical expenses on your tax return. Keep track of all the unreimbursed, out of
pocket expenses you have related to your hospital, doctors, lab tests, medicine
and any miles you drive for each of these.
When you combine these unexpected expenses with your planned
medical expenses for the year, you may be able to deduct a portion of your
The injured might be
a dependent for tax purposes
We traditionally consider the cost of daycare for a child as
the only eligible expense for the Credit for Child and Dependent Care. However, if you, your spouse, or a dependent
are unable to care for themselves, the cost of care while you work, or care for
you while a spouse works, may be eligible for a tax credit.
The individual being cared for must not be able to care for
themselves and require someone to help.
The expenses up to $2,400 ($4,800 if more than one individual) are
eligible for the credit. If you need a
health care professional to provide the care, the additional expenses above the
$2,400 ($4,800 if more than one individual) is generally eligible for the
medical expense deduction.
Tax implications of
When the injuries
from an accident are so severe, a taxpayer is placed on disability, there are
many different tax ramifications based on the type of disability.
- An employee who is able to
receive short-term disability while they are healing is considered to be
receiving wages and the income is included on the W-2 from their
- Long term disability
payments may not be taxed if you were able to include the cost of your
long-term disability insurance in your taxable income, the payments you
receive from the insurance company may be tax-free.
- If you receive disability
income from the Social Security Administration it is treated the same as
retirement benefits, up to 85 percent of the benefits may be taxable based
on your total income.
Taxability of the various types of disability benefits can
be extremely confusing. Seek help from a
Tax Professional if you have any type of disability income.
Deducting loss of
You may also be able to deduct the loss in value of your
property involved in the accident. Yes,
if your loss is greater than your insurance reimbursement you may be able to
deduct a part of the loss on your tax return.
The rules for claiming a tax deduction for a loss from an
accident are similar to those of a casualty.
You must subtract $100 from each loss and 10 percent of your adjusted
gross income from your total losses for the year. The remaining loss is claimed as part of your
If you had an accident this year and have disability income
or a potential tax deduction due to your accident, stop in to see your local Jackson Hewitt Tax
Pro to make sure you don’t leave any of your hard earned cash on the table.