For tax purposes, disabled means "unable to perform substantial gainful work" due to a condition that is permanent or will last at least one year. The ability to work a minimum wage job is usually considered proof that a person can perform gainful work. (However, working in a sheltered workshop that provides rehab services is not considered gainful work even if the person is paid.).
Many people who might be medically disabled aren't considered disabled for tax purposes because they can still perform gainful work. It depends on your specific circumstances.
For a child under age 13, marking them disabled in the tax program has no effect on your return. Between age 13 and 18, a disabled child can qualify for the dependent care credit (if you pay for care so you can work) even though non-disabled dependents age out of the that credit at 13. Over age 18, being disabled may allow you to claim your child as a dependent even though children normally age out of dependent status at 19 or 24, and there are a couple of other tax benefits that might go along with that.
