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Publication 907

Tax Highlights 
for Persons with 


Future Developments(p1)

Information about any future developments affecting Publication 907 (such as legislation enacted after we release it) will be posted at


This publication gives you a brief introduction to certain parts of the tax law of particular interest to people with disabilities and those who care for people with disabilities. It includes highlights about:
You will find most of the information you need to complete your tax return in your form instruction booklet. If you need additional information, you may want to order a free tax publication. You may also want to take advantage of the other free tax help services that the IRS provides.
See How To Get Tax Help, at the end of this publication, for information about getting publications, forms, and free tax services.

Comments and suggestions.(p1)

We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:

Internal Revenue Service
Individual and Specialty Forms and Publications Branch
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at Please put "Publications Comment" on the subject line. You can also send us comments from Select "Comment on Tax Forms and Publications" under "More Information."
Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products.
Ordering forms and publications.(p1)
Visit to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received.

Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613

Tax questions.(p2)
If you have a tax question, check the information available on or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.


All income is taxable unless it is specifically excluded by law. The following discussions highlight some income items (both taxable and nontaxable) that are of particular interest to people with disabilities and those who care for people with disabilities.

Dependent Care Benefits(p2)

Dependent care benefits include:
  1. Amounts your employer paid directly to either you or your care provider for the care of your qualifying person(s) while you work,
  2. The fair market value of care in a daycare facility provided or sponsored by your employer, and
  3. Pre-tax contributions you made under a dependent care flexible spending arrangement.

Exclusion or deduction.(p2)

If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Your employer can tell you whether your benefit plan qualifies. To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. You cannot use Form 1040EZ.
If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Therefore, you would not get an exclusion from wages. Instead, you would get a deduction for the dependent care benefits. To claim the deduction, you must use Form 2441.
The amount you can exclude or deduct is limited to the smallest of:
  1. The total amount of dependent care benefits you received during the year,
  2. The total amount of qualified expenses you incurred during the year,
  3. Your earned income,
  4. Your spouse's earned income, or
  5. $5,000 ($2,500 if married filing separately).

Statement for employee.(p2)

Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1.
Qualifying person(s).(p2)
A qualifying person is:
For information about excluding benefits on Form 1040, Form 1040NR, or Form 1040A, see Form 2441 and its instructions.

Social Security and Railroad Retirement Benefits(p2)

If you received social security or equivalent Tier 1 railroad retirement (RRTA) benefits during the year, part of the amount you received may be taxable.

Are any of your benefits taxable?(p2)

If the only income you received during the year was your social security or equivalent Tier 1 railroad retirement (RRTA) benefits, your benefits generally are not taxable and you probably do not have to file a return.
If you received income during the year in addition to social security or equivalent Tier 1 railroad retirement (RRTA) benefits, part of your benefits may be taxable if all of your other income, including tax-exempt interest, plus half of your benefits are more than:
For more information, see the instructions for Form 1040, lines 20a and 20b, or Form 1040A, lines 14a and 14b. Publication 915, Social Security and Equivalent Railroad Retirement Benefits, contains more detailed information.

Supplemental security income (SSI) payments.(p2)

Social security benefits do not include SSI payments, which are not taxable. Do not include these payments in your income.

Disability Pensions(p3)

If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled.
You may be entitled to a tax credit if you were permanently and totally disabled when you retired. For information on this credit, see Publication 524, Credit for the Elderly or the Disabled.
Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. For more information on pensions and annuities, see Publication 575, Pension and Annuity Income.

Retirement and profit-sharing plans.(p3)

If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. The payments must be reported as a pension or annuity.

Accrued leave payment.(p3)

If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. The payment is not a disability payment. Include it in your income in the tax year you receive it.
See Publication 525, Taxable and Nontaxable Income, for more information.

Military and Government Disability Pensions(p3)

Generally, you must report disability pensions as income, but do not include certain military and government disability pensions. For information about military and government disability pensions, see Publication 525.

VA disability benefits.(p3)

Do not include disability benefits you receive from the Department of Veterans Affairs (VA) in your gross income. If you are a military retiree and do not receive your disability benefits from the VA, see Publication 525 for more information.
Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the VA. These include:

Other Payments(p3)

You may receive other payments that are related to your disability. The following payments are not taxable.

Long-Term Care Insurance(p3)

Long-term care insurance contracts generally are treated as accident and health insurance contracts. Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. More detailed information can be found in Publication 525.

Accelerated Death Benefits(p3)

You can exclude from income accelerated death benefits you receive on the life of an insured individual if certain requirements are met. Accelerated death benefits are amounts received under a life insurance contract before the death of the insured. These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. This exclusion applies only if the insured was a terminally ill individual or a chronically ill individual. For more information, see Publication 525.