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How to Deduct Impairment-Related Expenses

Deduct Impairment Related Expenses

1.

Ask your doctor for a statement verifying your disability.

2.

Gather all of your receipts for any impairment related expenses you intend to deduct on your tax return. Keep them in a safe place. You may need them later.

3.

Call several different IRS customer service representatives and ask for advice on taking the deduction before you file your tax return. Write down their names and identification numbers.

4.

Consider asking for professional advice. Don't assume, however, that all tax advisors are familiar with IRWEs. Shop around and find one who is.

5.

Deduct your IRWEs on Schedule C, C-EZ (Profit or Loss from Business) or Schedule F (Profit or Loss from Farming) if you are a self-employed individual.

6.

Complete Form 2106 (Employee Business Expenses) or Form 2106-EZ (Unreimbursed Employee Business Expenses) if you are a disabled employee. Your IRWEs are not subject to the 2 percent adjusted gross income limit that applies to other employee business expenses.

7.

Enter the portion of the amount on Form 2106, line 10, or Form 2106-EZ, line 6, that's related to your impairment on Schedule A, line 27. Enter the amount that's unrelated to your impairment on Schedule A, line 20.

8.

File an amended return (IRS form 1040X) to deduct IRWEs you did not deduct in previous years. You are allowed to file an amended return for the previous 3 tax years.

Tips and Warnings

  • IRWE deductions save you more money than medical deductions because the entire expense is deductible. Medical expenses must exceed 7.5 percent of your adjusted gross income before they can be deducted. And, unlike other business expenses, IRWEs are not restricted to 2 percent of your adjusted gross income.
  • IRWEs are not well defined in the United States tax code. The code gives no clear explanation of qualifying expenses, and taxpayers asking the IRS for guidance often get inconsistent answers. If you claim a deduction and are audited, be prepared to prove that you would not be able to work without the equipment or services you are claiming a deduction for.


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