Table of Contents
If you qualify, the law provides a number of credits that can reduce the tax you owe for a year. One of these credits is the credit for the elderly or the disabled.
This chapter explains the following.
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Who qualifies for the credit for the elderly or the disabled.
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How to figure this credit.
You may be able to take this credit if:
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You are age 65 or older, or
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You retired on permanent and total disability and have taxable disability income.
Publication
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524 Credit for the Elderly or the Disabled
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554 Tax Guide for Seniors
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967 The IRS Will Figure Your Tax
Forms (and Instructions)
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Schedule 3 (Form 1040A) Credit for the Elderly or the Disabled for Form 1040A Filers
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Schedule R (Form 1040) Credit for the Elderly or the Disabled
You can take the credit for the elderly or the disabled if you meet both of the following requirements.
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You are a qualified individual.
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Your income is not more than certain limits.
You can use Figure 33-A and Figure 33-B as guides to see if you qualify.
Use Figure 33-A first to see if you are a qualified individual. If you are, go to Figure 33-B to make sure your income is not too high to take the credit.
You can take the credit only if you file Form 1040 or Form 1040A. You cannot take the credit if you file Form 1040EZ.
You are a qualified individual for this credit if you are a U.S. citizen or resident alien and either of the following applies.
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You were age 65 or older at the end of 2007.
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You were under age 65 at the end of 2007 and all three of the following statements are true.
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You retired on permanent and total disability (explained later).
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You received taxable disability income for 2007.
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On January 1, 2007, you had not reached mandatory retirement age (defined later under Disability income).
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You must be a U.S. citizen or resident alien (or be treated as a resident alien) to take the credit. Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year.
If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U.S. citizen or resident alien at the end of the year, you may be able to choose to be treated as a U.S. resident alien for the entire year. In that case, you may be allowed to take the credit.
For information on these choices, see chapter 1 of Publication 519, U.S. Tax Guide for Aliens.
Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. However, if you and your spouse did not live in the same household at any time during the tax year, you can file either joint or separate returns and still take the credit.
If you are under age 65 at the end of 2007, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income). You are retired on permanent and total disability if:
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You were permanently and totally disabled when you retired, and
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You retired on disability before the close of the tax year.
Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability.
If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977.
You are considered to be under age 65 at the end of 2007 if you were born after January 1, 1943.
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It must be paid under your employer's accident or health plan or pension plan.
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It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability.
To determine if you can claim the credit, you must consider two income limits. The first limit is the amount of your adjusted gross income (AGI). The second limit is the amount of nontaxable social security and other nontaxable pensions you received. The limits are shown in Figure 33-B, earlier.
If both your AGI and nontaxable pensions are less than the income limits, you may be able to claim the credit. See Figuring the Credit, next.
If either your AGI or your nontaxable pensions are equal to or more than the income limits, you cannot take the credit.
You can figure the credit yourself (see the explanation that follows) or the IRS will figure it for you. See Credit Figured for You, later.
Table 33-1. Initial Amounts
IF your filing status is ... | THEN enter on line 10 of Schedule R (Form 1040) or Schedule 3 (Form 1040A)... | |||
single, head of household, or qualifying widow(er) with dependent child and, by the end of 2007, you were | ||||
• 65 or older | $5,000 | |||
• under 65 and retired on permanent and total disability 1 | $5,000 | |||
married filing a joint return and by the end of 2007 | ||||
• both of you were 65 or older | $7,500 | |||
• both of you were under 65 and one of you retired on permanent and total disability 1 | $5,000 | |||
• both of you were under 65 and both of you retired on permanent and total disability 2 | $7,500 | |||
• one of you was 65 or older, and the other was under 65 and retired on permanent and total disability 3 | $7,500 | |||
• one of you was 65 or older, and the other was under 65 and not retired on permanent and total disability | $5,000 | |||
married filing a separate return and you did not live with your spouse at any time during the year and, by the end of 2007, you were | ||||
• 65 or older | $3,750 | |||
• under 65 and retired on permanent and total disability 1 | $3,750 |
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Determine your initial amount (lines 10–12).
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Determine the total of any nontaxable social security and certain other nontaxable pensions and disability benefits you received (lines 13a, 13b, and 13c).
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Determine your excess adjusted gross income (lines 14–17).
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Determine your credit (lines 18–24 of Schedule R or lines 18–22 of Schedule 3).
To figure the credit, you must first determine your initial amount. See Table 33-1 .
Step 2 is to figure the total amount of nontaxable social security and certain other nontaxable payments you received during the year.
Enter these nontaxable payments on lines 13a or 13b, and total them on line 13c. If you are married filing a joint return, you must enter the combined amount of nontaxable payments both you and your spouse receive.
Worksheets are provided in the instructions for Forms 1040 and 1040A to help you determine if any of your social security benefits (or equivalent railroad retirement benefits) are taxable.
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Nontaxable social security payments. This is the nontaxable part of the amount of benefits shown in box 5 of Form SSA-1099, Social Security Benefit Statement, which includes disability benefits, before deducting any amounts withheld to pay premiums on supplementary Medicare insurance, and before any reduction because of benefits received under workers' compensation. (Do not include a lump-sum death benefit payment you may receive as a surviving spouse, or a surviving child's insurance benefit payments you may receive as a guardian.)
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Nontaxable railroad retirement pension payments treated as social security. This is the nontaxable part of the amount of benefits shown in box 5 of Form RRB-1099, Payments by the Railroad Retirement Board.
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Nontaxable pension or annuity payments or disability benefits that are paid under a law administered by the Department of Veterans Affairs (VA). (Do not include amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country or in the National Oceanic and Atmospheric Administration, or the Public Health Service, or as a disability annuity under section 808 of the Foreign Service Act of 1980.)
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Pension or annuity payments or disability benefits that are excluded from income under any provision of federal law other than the Internal Revenue Code. (Do not include amounts that are a return of your cost of a pension or annuity. These amounts do not reduce your initial amount.)
You should be sure to take into account all of the nontaxable amounts you receive. These amounts are verified by the IRS through information supplied by other government agencies.
You also must reduce your initial amount by your excess adjusted gross income. Figure your excess adjusted gross income on lines 14–17.
You figure your excess adjusted gross income as follows:
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Subtract from your adjusted gross income (Form 1040, line 38 or Form 1040A, line 22) the amount shown for your filing status in the following list.
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$7,500 if you are single, a head of household, or a qualifying widow(er) with a dependent child,
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$10,000 if you are married filing a joint return, or
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$5,000 if you are married filing a separate return and you and your spouse did not live in the same household at any time during the tax year.
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Divide the result of (1) by 2.
To determine if you can take the credit, you must add the amounts you figured in Step 2 and Step 3.
IF the total of Steps 2 and 3 is ... | THEN ... |
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equal to or more than the amount in Step 1 | you cannot take the credit. | |
less than the amount in Step 1 | you can take the credit. |
Example.
You are 66 years old and your spouse is 64. Your spouse is not disabled. You file a joint return on Form 1040. Your adjusted gross income is $14,630. Together you received $3,200 from social security, which was nontaxable. You figure the credit as follows:
1) | Initial amount | $5,000 | |||
2) | Subtract from line 1 the total of: | ||||
a. Nontaxable social security and other nontaxable pensions | $3,200 | ||||
b. Excess adjusted gross income
($14,630 − $10,000) ÷ 2 |
2,315 | 5,515 | |||
3) | Balance (Not less than -0-) | -0- | |||
4) | Credit | -0- |
You cannot take the credit because your nontaxable social security (line 2a) plus your excess adjusted gross income (line 2b) is more than your initial amount (line 1).
At the time this publication went to print, Congress was considering legislation that would affect this limit. To find out if the legislation was enacted, and for more details, see the Instructions for Schedule R (Form 1040).
If you choose to have the Internal Revenue Service (IRS) figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). If you want the IRS to figure your tax, see chapter 30.
The following example illustrates the credit for the elderly or the disabled. The initial amount is taken from Table 33-1, shown earlier.
James Davis is 58 years old, single, and files Form 1040A. In 1998 he retired on permanent and total disability, and he is still permanently and totally disabled. He got the required physician's statement in 1998, and kept it with his records. His physician signed on line B of the statement. This year James checks the box in Part II of Schedule 3. He does not need to get another statement for 2007.
He received the following income for the year:
Nontaxable social security | $1,500 |
Interest (taxable) | 100 |
Taxable disability pension | 11,400 |
James' adjusted gross income is $11,500 ($11,400 + $100). He figures the credit on Schedule 3 as follows:
1) | Initial amount | $5,000 | |||
2) | Taxable disability pension | 11,400 | |||
3) | Smaller of (1) or (2) | 5,000 | |||
4) | Subtract from line 3 the total of: | ||||
a. Nontaxable social security benefits | $1,500 | ||||
b. Excess adjusted gross income
($11,500 – $7,500) ÷ 2 |
2,000 | 3,500 | |||
5) | Balance (not less than -0-) | 1,500 | |||
6) | Multiply line 5 by 15% (.15) | 225 | |||
7) | Enter the amount from Form 1040A, line 28 | 276 | |||
8) | Enter any amounts from Form 1040A, line 29 | -0- | |||
9) | Subtract line 8 from line 7 | 276 | |||
10) | Credit
(Enter the smaller of line 6 or line 9) |
$225 |
His credit is $225. He enters $225 on line 30 of Form 1040A. The Schedule 3 for James Davis is not shown.
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