Payments the person with a disability makes after November 30, 1980 for items needed in order to work are deductible whether the item is purchased before or after the person with a disability begins working, if the person needs the item in order to work.

Payments the person with a disability makes after November 30, 1980 for services are deductible if the services are received while the person is working. Deductions for services may be made even though a person must leave work temporarily to receive the services. The costs of any services received before the person begins working are not deductible.

The SGA decision in a case involving IRWE for items or services necessary for the person with a disability to work generally will be based upon the person's earnings. The exceptions to this would be:

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  a situation in which a person with a disability is in a position to control or manipulate the amount of their earnings; e.g., the person is self-employed and the value of services rendered is clearly worth an amount greater than the earnings received; or

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  the person’s earnings are being subsidized.

In these situations, it will be necessary to first determine the value of services being rendered and then deduct the IRWE. See the guidelines in DI 10505.020 concerning work by employees, and DI 10510.010 concerning work by self-employed persons and/or DI 10505.010 for policy on subsidy.

Other than the exceptions above, the deduction of IRWE does not alter any of the basic concepts for evaluating SGA, e.g., averaging earnings, establishing disability, or determining whether a person's disability has ceased. However, after a person's disability has ceased because of SGA, and the only issue is whether they are entitled to benefit payments during any remaining months of the extended period of eligibility, the matter of SGA must be determined on a month-to-month basis and the concept of averaging earnings is not applicable. (See DI 13010.210 concerning extension of eligibility, for benefits based on disability.) 

IRWE provisions do not apply for the purpose of determining a service month in the TWP. Do not make IRWE deductions during the TWP.

The amount of the deductions must be determined in a uniform manner in both the DI and SSI programs. Therefore, the amount of deductions must be the same for both SGA determinations and SSI payment purposes. (For exception, see DI 10520.030A.7.)

The amount of IRWE to be deducted from earnings or from earned income is the total allowable amount (subject to reasonable limits) that the person with a disability pays for the item or service. The amount to be deducted is not determined by assigning a certain portion of the expense to work activity and a certain portion to nonwork activity (e.g., 40 percent of the time at work and 60 percent of the time at home).

EXCEPTIONS:

Attendant care services (See DI 10520.010D.) and vehicle operating expenses (See DI 10520.010J.). The amount deducted, however, is subject to reasonable limits (See DI 10520.010C.).

When determining countable income, IRWE are not deductible from earned income if the income used for the purchase of the impairment-related item or service is deducted as part of a plan to achieve self-support (PASS) for the same period. However, any portion of the payment for an item or service paid with income that is not deducted as part of the PASS can be deducted as an IRWE if the expense itself meets the requirements for an IRWE deduction. For purposes of determining SGA, the entire amount paid for the item or service is deductible.

EXAMPLE:

A concurrently entitled beneficiary purchases an impairment-related item necessary to achieve their designated occupational goal at a cost of $600. They pay the bill with $500 designated for their PASS and $100 of other income. For purposes of determining title XVI countable income, $100 is deductible. However, for title II purposes, the entire $600 is deductible as an IRWE. (If only $550 is deducible because of the reasonable limits provision, for countable income purposes, $50 is deductible and for SGA purposes $550 is deductible.)

Some IRWE are paid on a recurring basis. In the case of durable equipment (respirator, wheelchair, etc.), the cost is ordinarily paid over a period of time under some type of installment purchase plan. In addition to the cost of the purchased item, interest and other normal charges (e.g., sales tax) that a person with a disability pays on the purchase will be deductible. Generally, the amount the person pays monthly will be the deductible amount. In the case of ongoing attendant care or medical services (e.g., physical therapy), the costs are generally paid and are deducted on a monthly basis. Such costs are deductible only if the services are received while the person is working. If the entire cost of the purchased item cannot be deducted because of the reasonable limits provision, the interest and other charges must be proportionately reduced.

A special rule applies in situations where a person with a disability pays recurring IRWEs less frequently than monthly, e.g., quarterly. These expenses either may be deducted entirely in the month payment is made or allocated over the months in the payment period, whichever the person selects.

EXAMPLE 1:

A person with a disability starts work in October 2001; they earn and receive $800 a month. In the same month they purchase a medical device at a cost of $4,800 plus interest charges of $720. The term of the installment contract is 48 months. No down payment is made, and they begin their monthly payments in October. The monthly allowable deduction for the item is $115 ($5,520 divided by 48) for each month of work during the 48 months. (If, instead of $4,800, only $4,200 is deductible because of the reasonable limits provision, since $4,200 is seven-eighths of $4,800, only $630 of interest charges, or seven-eighths of $720, is deductible.)

Part or all of a person's IRWE may not be recurring (e.g., the person with a disability makes a one-time payment in full for an item or service). Such nonrecurring expenses either may be deducted entirely in 1 month, or may be prorated over a 12-consecutive month period, whichever the person chooses. They should consider which method will provide more benefits, including the amount of SSI payment in SSI cases.

EXAMPLE 2:

A person with a disability starts work in October 2001; they earn and receive $950 a month. In the same month they purchase and pay for a deductible item at a cost of $250. In this situation a $250 deduction for October 2001 can be allowed, reducing the person's earnings below SGA for that month.

In the above example, if the person's earnings are just a few dollars above the SGA earnings amount, they would probably choose to have the $250 payment projected over the 1-year period, October 2001 to September 2002, thus providing an allowable deduction of $20.83 a month for each month during that period to reduce the earnings below the SGA level for 12 months.

A person with a disability may make a down payment on an impairment-related item, or possibly a service, to be followed by regular monthly payments. Such down payments either are deducted entirely in 1 month, or allocated over a 12-consecutive month period, whichever the person chooses. Explain that the down payment may be allocated in order to provide for uniform monthly deductions.

When the down payment is allocated over a 12-month period, make the following calculation:

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  determine the total payment made over a 12-consecutive month period beginning with the month of down payment (i.e., the down payment plus the regular monthly payments that are made during that period) and

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  divide the total equally over the 12 months.

Beginning with the 13th month, deduct the regular monthly payment amount. If the regular monthly payments extend for less than 12 months, allocate the total amount payable (down payment plus monthly payments) over the shorter period.

EXAMPLE 3:

A person with a disability starts working in October 2001, at which time they purchase special equipment at a cost of $4,800, paying $1,200 down. The balance of $3,600, plus interest of $540, is to be repaid in 36 installments of $115 a month beginning November 2001. The person earns and receives $800 a month. In this situation a $205.42 monthly deduction is allowed beginning October 2001 and ending in September 2002. After September 2002, the deduction amount is the regular monthly payment of $115. Calculation for above example:

EXAMPLE 4:

While working, a person with a disability purchases a deductible item in July 2001, paying $1,450 down. (The person earns and receives $500 a month.) However, the first monthly payment of $125 is not due until September 2001. In this situation, a $225 monthly deduction is allowed beginning in July 2001 and ending in June 2002. After June 2002, the deduction amount is the regular monthly payment of $125. Calculation for above example:

When a person with a disability rents or leases an item while working, the allowable deductible amount is the actual monthly charge. Where the rental or lease payments are made other than monthly (e.g., weekly), it is necessary to compute monthly payment amounts. As with other costs, rental or lease payments are subject to the reasonable limits provision. (See DI 10520.025D.) An amount that does not exceed the standard or normal rental or lease charge for the same or similar item in the person's community is considered reasonable.

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  Durable items are things that can be used repeatedly. These include, but are not limited to, medical devices (e.g., wheelchairs, braces), prostheses, work-related equipment (e.g., typing aids, electronic visual aids), residential modifications, nonmedical appliances (e.g., air cleaner), service animals and vehicle modifications. Things that are not considered durable items (and not deductible) include, but are not limited to, services, drugs, oxygen, diagnostic procedures, medical supplies (e.g., catheters, incontinence pads), and vehicle operating costs.

The expenditure may be a monthly (recurring) payment, a one-time (nonrecurring) payment, or a down payment, but may not be made for a rented or leased item; and it must be made sometime in the 11 months preceding the month work starts. The person must be disabled when payment is made. Payments made prior to the established onset date of disability are not deductible. As with all expenses, the person must pay the expense in cash (including checks or other forms of money) rather than in kind, and it must be within the reasonable limits guidelines. The item must be required in order for the person to work (i.e., the person must use the item while working), and this need must be verified.

A person with a disability may require an item or service in the month they begin working, but is no longer working in the following month when payment for the item or service is made. Under the regular rules, the payment is not deductible for SGA purposes because the payment is not made in a month of work. However, this is an exception to the regular rules. In order not to penalize the person, the payment is deducted in the last month the person performs SGA.

Where structural or operational modifications are made to a vehicle without which the person could not get to and from work, the actual cost of the modification (but not the cost of the vehicle) is deductible if paid by the person. For example: a handbrake is specially installed on an automobile for a person whose impairment involves the legs, or an electric lift is added to a van for a person who uses a wheelchair.

In addition to the cost of modification, the operating costs of a modified vehicle that are directly related to work (and for travel to and from place of employment) are also deductible. For the purpose of IRWE, the determination of operating costs of a vehicle in the past was based upon the vehicle class and on a mileage rate corresponding to that class. Operating costs were based on data compiled by the Federal Highway Administration in their publication, Cost of Owning Operating Automobiles, Vans Light Trucks. However, this data was last published in April 1992. Therefore, we are phasing out the use of vehicle class mileage rates and replacing them with the standard mileage rate permitted by IRS for non-governmental business use.

Determine the daily mileage to and from work. Multiply that by the appropriate mileage rate to obtain the daily mileage cost. Multiply the daily mileage cost by number of days worked per month to obtain the monthly amount.