The expenses you incur as a result of any disability that has a "moderate to severe" impact on your life, or that of a dependant, will be fully tax-deductible from this tax year (2009/2010).
This means that the expenses you incur as a result of a wider range of disabilities will now qualify for full tax deductions. Previously only those you incurred as a result of certain narrowly defined disabilities were allowed.
However, where previously any expenses were tax-deductible, the expenses for which you can claim will have to appear on a list contained in regulations to be published under the Income Tax Act.
The South African Revenue Service (SARS) recently released a discussion paper that contains the proposed list of expenses you will be able to claim against tax if you or your dependants have a qualifying disability.
The list includes aids and devices, such as hearing aids, orthopaedic or surgical equipment, wheelchairs and crutches; travel and related expenses; the cost of hiring a caregiver; products required for incontinence; the cost of obtaining and keeping animals, such as guide dogs; and the cost of modifications to assets such as altering your house to accommodate a person in a wheelchair.
SARS says the reason for the list is that the deductions it allowed in the past were open to interpretation and this led to uncertainty.
For example, SARS says, disabled taxpayers would claim the cost of acquiring a vehicle, instead of just the cost of modifying the vehicle to cater to their disability. The cost of acquiring the vehicle is not necessarily incurred as a consequence of a disability, whereas the costs of modifying it are directly linked to the disability, SARS says.
The expenses you incur as a result of physical impairments that have only a mild impact on your life or that of a dependant will be deductible only to the extent that they exceed 7.5 percent of your taxable income, unless you are over the age of 65.
Taxpayers over 65 can deduct any medical expenses not recouped from a medical scheme.
Previously, in order to claim disability-related expenses in full, you, your spouse or child had to be "handicapped" as defined by the Income Tax Act.
The Act defined a handicapped person as someone who:
- Is blind;
- Is deaf;
- Is permanently disabled and requires a wheelchair, calliper or crutch to move around;
- Has an artificial limb; or
- Suffers from a mental illness as defined in the Mental Health Care Act.
You were also allowed to claim for physical disabilities such as bad eyesight and hearing problems, or for illnesses such as diabetes, multiple sclerosis and asthma.
Disability defined
As of March 1 this year, the Income Tax Act was amended to introduce a deduction for people with disabilities, and the term "disability" was defined.
A disability is defined as a "moderate to severe limitation" of your ability to function or perform daily activities as a result of a physical, sensory, communication, intellectual or mental impairment.
Your disability must have lasted more than a year or be expected to last more than a year, and you must have been diagnosed by a registered medical practitioner.
A "moderate to severe limitation" is interpreted to mean a significant restriction on your ability to function or perform one or more basic daily activities after maximum medical correction.
The expenses you claim as a tax deduction will have to be ones that were necessary, and if you claim for dependants they must have been on your medical scheme at the time the expenses were incurred.
To claim a disability-related tax deduction, a registered medical practitioner will have to complete a form on an annual basis.
The Act now also defines a "physical impairment" as an impairment that does not have a severe impact on your daily activities.
If you are under 65, expenses for such a "physical impairment" will be tax-deductible only to the extent that they exceed 7.5 percent of your taxable income. This is the limit any taxpayer needs to exceed before being able to claim an unrecouped medical expense against tax.
For example, if your vision is not perfect but can be corrected with glasses, you will be able to claim against your taxable income the unrecouped expenses related to your vision only where these exceed 7.5 percent of your taxable income. This means you would need to spend a high amount before you qualify for a deduction for what is now defined as a physical impairment.
Your sight would have to be very poor before you could be regarded as having a disability and entitled to a full deduction for your expenses.