You must be totally and permanently disabled, unable to be substantially gainfully employed, and you must be receiving income from a disability retirement plan and be eligible for the homestead exemption under Section 12-37-250 to qualify. You must have a physician's statement establishing that you are permanently and totally disabled.
The deduction is limited to payments received from retirement plans. Third party sick pay reported on a W-2 (W2) does not qualify for the disability retirement deduction.
A surviving spouse may take a disability retirement deduction for amounts received in the year the disabled spouse died. For subsequent years, a surviving spouse is not eligible for the disability deduction.