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:
Who qualifies for
the credit for the
elderly or the disabled,
and
How to figure this
credit.
You may be able to take this
credit if you are:
Age 65 or older, or
Retired on permanent
and total disability.
Useful Items - You
may want to see:
Publication
524
Credit for the Elderly
or the Disabled
554
Older Americans' Tax
Guide
967
The IRS Will Figure Your
Tax
Forms
(and Instructions)
Schedule 3 (Form 1040A)
Credit for the Elderly
or the Disabled for Form
1040A Filers
Schedule R (Form 1040)
Credit for the Elderly
or the Disabled
Can You Take the
Credit?
You can take the credit for
the elderly or the disabled if
you meet both of the following
requirements.
You are a qualified
individual.
Your income is not
more than certain
limits.
You can use Figure 35-A and
Figure 35-B as guides to see if
you qualify.
Use Figure 35-A first to see
if you are a qualified
individual. If you are, go to
Figure 35-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.
Qualified
Individual
You are a qualified
individual for this credit
if you are a U.S. citizen or
resident and either of the
following applies.
You were age 65
or older at the end
of 2004.
You were under
age 65 at the end of
2004 and all three
of the following
statements are true.
You
retired on
permanent
and total
disability
(explained
later).
You
received
taxable
disability
income for
2004.
On
January 1,
2004, you
had not
reached
mandatory
retirement
age (defined
later under
Disability
income).
Age 65.
You are considered to
be age 65 on the day
before your 65th
birthday. Therefore, if
you were born on January
1, 1940, you are
considered to be age 65
at the end of 2004.
U.S. Citizen
or Resident
You must be a U.S.
citizen or resident (or
be treated as a
resident) to take the
credit. Generally, you
cannot take the credit
if you were a
nonresident alien at any
time during the tax
year.
Exceptions.
You may be able to
take the credit if
you are a
nonresident alien
who is married to a
U.S. citizen or
resident at the end
of the tax year and
you and your spouse
choose to treat you
as a U.S. resident.
If you make that
choice, both you and
your spouse are
taxed on your
worldwide income.
If you were a
nonresident alien at the
beginning of the year
and a resident at the
end of the year, and you
were married to a U.S.
citizen or resident at
the end of the year, you
may be able to choose to
be treated as a U.S.
resident 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.
Married
Persons
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.
Head of household.
You can file as
head of household
and qualify to take
the credit, even if
your spouse lived
with you during the
first 6 months of
the year, if you
meet all the tests.
See
Head of
Household in chapter 2
for the tests you
must meet.
Under Age 65
If you are under age
65 at the end of 2004,
you can qualify for the
credit only if you are
retired on permanent and
total disability. You
are retired on permanent
and total disability if:
You were
permanently and
totally disabled
when you
retired, and
You retired
on disability
before the close
of the tax year.
Even if you do not
retire formally, you are
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
2004 if you were born
after January 1, 1940.
Permanent and total
disability.You are
permanently and
totally disabled if
you cannot engage in
any substantial
gainful activity
because of your
physical or mental
condition. A
physician must
certify that the
condition has lasted
or can be expected
to last continuously
for 12 months or
more, or that the
condition can be
expected to result
in death. See
Physician's
statement,
later.
Substantial
gainful activity.
Substantial
gainful activity is
the performance of
significant duties
over a reasonable
period of time while
working for pay or
profit, or in work
generally done for
pay or profit.
Full-time work (or
part-time work done
at your employer's
convenience) in a
competitive work
situation for at
least the minimum
wage conclusively
shows that you are
able to engage in
substantial gainful
activity.
Substantial
gainful activity is
not work you do to
take care of
yourself or your
home. It is not
unpaid work on
hobbies,
institutional
therapy or training,
school attendance,
clubs, social
programs, and
similar activities.
However, doing this
kind of work may
show that you are
able to engage in
substantial gainful
activity.
The fact that
you have not worked
for some time is
not, of itself,
conclusive evidence
that you cannot
engage in
substantial gainful
activity.
Sheltered
employment.
Certain work
offered at qualified
locations to
physically or
mentally impaired
persons is
considered sheltered
employment. These
qualified locations
are in sheltered
workshops, hospitals
and similar
institutions,
homebound programs,
and Department of
Veterans Affairs
(VA) sponsored
homes.
Compared to
commercial
employment, pay is
lower for sheltered
employment.
Therefore, one
usually does not
look for sheltered
employment if he or
she can get other
employment. The fact
that one has
accepted sheltered
employment is not
proof of that
person's ability to
engage in
substantial gainful
activity.
Physician's
statement.
If you are under
age 65, you must
have your physician
complete a statement
certifying that you
were permanently and
totally disabled on
the date you
retired. You can use
the statement in the
instructions for
Schedule R (Form
1040) or Schedule 3
(Form 1040A).
Figure
35-A Are
You a
Qualified
Individual?
Figure
35-B
Income
Limits
You do not have to
file this statement
with your Form 1040
or Form 1040A, but
you must keep it for
your records.
Veterans.
If the Department
of Veterans Affairs
(VA) certifies that
you are permanently
and totally
disabled, you can
substitute VA Form
21-0172,
Certification of
Permanent and Total
Disability, for the
physician's
statement you are
required to keep. VA
Form 21-0172 must be
signed by a person
authorized by the VA
to do so. You can
get this form from
your local VA
regional office.
Physician's
statement obtained
in earlier year.
If you got a
physician's
statement in an
earlier year and,
due to your
continued disabled
condition, you were
unable to engage in
any substantial
gainful activity
during 2004, you may
not need to get
another physician's
statement for 2004.
For a detailed
explanation of the
conditions you must
meet, see the
instructions for
Part II of Schedule
R (Form 1040) or
Schedule 3 (Form
1040A). If you meet
the required
conditions, check
the box on line 2 of
Part II of Schedule
R (Form 1040) or
Schedule 3 (Form
1040A).
If you checked box
4, 5, or 6 in Part I
of either Schedule R
or Schedule 3,
enter, in the space
above the box on
line 2 in Part II,
the first name(s) of
the spouse(s) for
whom the box is
checked.
Disability income.
If you are under
age 65, you can
qualify for the
credit only if you
have taxable
disability income.
Disability income
must meet both of
the following
requirements.
It must
be paid
under your
employer's
accident or
health plan
or pension
plan.
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.
Payments that
are not disability
income.
Any payment you
receive from a plan
that does not
provide for
disability
retirement is not
disability income.
Any lump-sum payment
for accrued annual
leave that you
receive when you
retire on disability
is a salary payment
and is not
disability income.
For purposes
of the credit for
the elderly or the
disabled, disability
income does not
include amounts you
receive after you
reach mandatory
retirement age.
Mandatory retirement
age is the age set
by your employer at
which you would have
had to retire, had
you not become
disabled.
Income
Limits
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 35-B, later.
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.
Figuring 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.
Figuring
the credit yourself.
If you figure the credit
yourself, fill out the front
of either Schedule R (if you
are filing Form 1040) or
Schedule 3 (if you are
filing Form 1040A). Next,
fill out Part III of either
Schedule R or Schedule 3.
Table 35-1.
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 2004, 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 2004
• 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
2004, you
were
• 65 or
older
$3,750
• under 65
and retired
on permanent
and total
disability
1
$3,750
1Amount
cannot be
more than
the taxable
disability
income.
2Amount
cannot be
more than
your
combined
taxable
disability
income.
3Amount
is $5,000
plus the
taxable
disability
income of
the spouse
under age
65, but not
more than
$7,500.
There are four steps in Part
III to determine the amount
of your credit:
Determine your
initial amount
(lines 10 – 12).
Total any
nontaxable social
security and certain
other nontaxable
pensions and
disability benefits
you received (lines
13a, 13b, and 13c).
Determine your
excess adjusted
gross income (lines
14 – 17).
Determine your
credit (lines 18–24
of Schedule R or
lines 18 – 22 of
Schedule 3).
These steps are discussed in
more detail next.
Step 1.
Determine
Initial Amount
To figure the credit, you
must first determine your
initial amount. See Table
35-1.
Initial
amounts for persons
under age 65. If
you are a qualified
individual under age 65,
your initial amount
cannot be more than your
taxable disability
income.
Step 2.
Total Certain
Nontaxable
Pensions and
Benefits
Step 2 is to figure the
total amount of nontaxable
social security and certain
other nontaxable payments
you received during the
year. (See
Nontaxable payments,
later.)
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 Form 1040 or
Form 1040A instructions to
help you determine if any
part of your social security
benefits (or equivalent
railroad retirement
benefits) is taxable.
Nontaxable payments.
Include the following
nontaxable payments in
the amounts you enter on
lines 13a and 13b.
Nontaxable
social security
payments. This
is the
nontaxable part
of the amount of
benefits shown
in box 5 of Form
SSA-1099, which
includes
disability
benefits, before
deducting any
amounts withheld
to pay
premiums on
supplementary
Medicare
insurance, and
before any
reduction
because of
receipt of a
benefit 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.
Social
security
equivalent part
of tier 1
railroad
retirement
pension payments
that is not
taxed. This is
the nontaxable
part of the
amount of
benefits shown
in box 5 of Form
RRB-1099.
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.
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.
Step 3.
Determine Excess
Adjusted Gross
Income
You also must reduce your
initial amount by your
excess adjusted gross
income. Figure your excess
adjusted gross income on
lines 14 through 17.
You figure your excess
adjusted gross income as
follows:
Subtract from
your adjusted gross
income (line 37 of
Form 1040 or line 22
of Form 1040A) the
amount shown for
your filing status
in the following
list:
$7,500
if you are
single, a
head of
household,
or a
qualifying
widow(er)
with a
dependent
child,
$10,000
if you are
married
filing a
joint
return, or
$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.
Divide the
result of (1) by 2.
Step 4.
Determine Your
Credit
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 ...
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.
Figuring the credit.
If you can take the
credit, subtract the
total of Step 2 and Step
3 from the amount in
Step 1 and multiply the
result by 15%.
In certain cases, the
amount of your credit
may be limited. See
Limit on credit,
later.
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 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 since your
nontaxable social
security (line 2a) plus
your excess adjusted
gross income (line 2b)
is more than your amount
on line 1.
Limit
on credit.
The amount of credit
you can claim may be
limited.
Figure any limit on
your credit on lines
21–24 of Schedule R or
lines 21–22 of Schedule
3.
Credit
Figured for You
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 32.
Form
1040. If you want
the IRS to figure your
credit, see
Form 1040 Line
Entries
under
Tax Figured by IRS
in chapter
32.
Form
1040A. If you want
the IRS to figure your
credit, see
Form 1040A Line
Entries
under
Tax Figured by IRS
in chapter
32.
Examples
The following examples
illustrate the credit for
the elderly or the disabled.
The initial amounts are
taken from Table 35-1, shown
earlier.
Example 1.
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
2004.
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 the
total of:
a)
Nontaxable
disability
benefits
(social
security)
$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.
358
8)
Enter any
amounts from
Form 1040A,
line 29.
-0-
9)
Subtract
line 8 from
line 7
358
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.
Example 2.
William White is 53.
His wife Helen is 49.
William had a stroke 3
years ago and retired on
permanent and total
disability. He is still
permanently and totally
disabled because of the
stroke. In November of
last year, Helen was
injured in an accident
at work and retired on
permanent and total
disability.
William received
nontaxable social
security disability
benefits of $3,000
during the year and a
taxable disability
pension of $6,000. Helen
earned $9,200 from her
job and received a
taxable disability
pension of $1,000. Their
joint return on Form
1040 shows adjusted
gross income of $16,200
($6,000 + $9,200 +
$1,000).
Helen got her doctor
to complete the
physician's statement in
the instructions for
Schedule R. Helen is not
required to include the
statement with her
return for the year, but
she must keep it for her
records.
William got a
physician's statement
for the year he had the
stroke. His doctor had
signed on line B of that
physician's statement to
certify that William was
permanently and totally
disabled. William has
kept the physician's
statement with his
records. He checks the
box in Part II of
Schedule R and writes
his first name in the
space above line 2.
William and Helen use
Schedule R to figure
their $31 credit for the
elderly or the disabled.
They attach Schedule R
to their joint return
and enter $31 on line 48
of Form 1040. See their
filled-in Schedule R and
Helen's filled-in
physician's statement on
the previous three
pages.
Instructions for
Physician's
Statement
Taxpayer
1.
He or she
cannot
engage in
any
substantial
gainful
activity
because of a
physical or
mental
condition,
and
If you
retired
after 1976,
enter the
date you
retired in
the space
provided on
the
statement
below.
2.
A physician
determines
that the
disability
has lasted
or can be
expected to
last
continuously
for at least
a year or
can lead to
death.
Physician
A person is
permanently
and totally
disabled if
both
of the
following
apply:
Physician's
Statement
(keep for
your
records)
I certify
that
Helen A.
White
Name of
disabled
person
was
permanently
and totally
disabled on
January 1,
1976, or
January 1,
1977,
OR
was
permanently
and totally
disabled on
the date he
or she
retired. If
retired
after 1976,
enter the
date
retired.
November
30, 2004
Physician:
Sign your
name on
either
A or B
below.
AThe
disability
has lasted
or can be
expected to
last
continuously
for at least
a year
Physician's
signatureDate
BThere
is no
reasonable
probability
that the
disabled
condition
will ever
improve
