The Credit for the Elderly or the Disabled is a beneficial tax credit that is intended to offer relief to disabled individuals and elderly individuals. The non-refundable tax credit can potentially lower your income tax bill up to $1,125. The following guide offers a comprehensive discussion of the eligibility requirements, income limits, and procedure for receiving this beneficial tax credit.
What is the Credit for the Elderly or the Disabled?
The Credit for the Elderly or the Disabled is a dollar-for-dollar reduction of your tax bill designed especially to lighten the tax burden of older and disabled taxpayers. The credit varies based on your marital status, adjusted gross income (AGI), and non-taxable income with a cap of $1,125. As a non-refundable credit, it will merely cut your tax bill to zero and won’t leave you with a refund if the credit exceeds your tax liability.
Who qualifies for the credit?
In order to qualify for this credit, you will have to fulfill some conditions:
- Age requirement: You should be 65 or older on the final day of the tax year.
- Disability requirement: If you are below 65, you may qualify if you fulfill all three of these conditions:
- You are permanently and totally disabled, i.e., you are unable to work because of a physical or mental impairment
- You had taxable disability income in the tax year
- You were not yet at the age of mandatory retirement (the age your employer would have forced you to retire) before the start of the tax year
Also, all applicants must be U.S. citizens or resident aliens on the last day of the tax year.
Income limitations
Your qualification is also limited by income requirements based on filing status:
- Adjusted Gross Income (AGI) limits:
- Single, Head of Household, or Qualifying Widow(er): $17,500
- Married Filing Jointly (one qualifying spouse): $20,000
- Married Filing Jointly (both qualifying): $25,000
- Nontaxable income limits: If your nontaxable income (such as Social Security benefits or other nontaxable pensions) is more than this, you can’t claim the credit:
- Single, Head of Household, or Qualifying Widow(er): $5,000
- Married Filing Jointly (one qualifying spouse): $5,000
- Married Filing Jointly (both qualifying): $7,500
Observe how married people who file separately but lived together during the year are not allowed the credit.
How to calculate and claim the credit
- Completing Schedule R: To qualify for the credit, you will need to fill out IRS Schedule R, which requires:
- Part 1: Responding to questions about your age and disability status
- Part 2: If disabled, verifying your medical condition (you may need a Physician’s Statement)
- Part 3: Computing the credit amount by going through a set of steps with your income and fixed figures
- Calculation process: The procedure consists of:
- Having a starting amount depending on your filing status
- Looking at your taxable disability income (up to $7,500)
- Tweaking for pensions or annuity payments
- Deducting from your AGI and halving
- Doubling the last amount and multiplying it by 15% to figure your credit amount
- Reporting your credit: When computed:
- Round your credit amount to Schedule 3 for Form 1040
- Check box “C” and print “Schedule R” on the space for lines
- Report the completed Schedule R with your tax return
Keep in mind that this credit is not refundable, i.e., it can at most lower your tax to zero and cannot create a refund in case the credit is more than your tax bill.
Physician’s Statement Requirement
If you’re under 65 and seeking the credit for disability, your doctor will be required to sign a statement stating that you’re permanently and totally disabled on your retirement date. The document is needed to qualify you.
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