Table of Contents
If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040).
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 the credit.
You may be able to take the credit for the elderly or the disabled if:
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You are age 65 or older at the end of 2011, 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
Form (and Instruction)
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Schedule R (Form 1040A or 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 32-A and Figure 32-B as guides to see if you are eligible for the credit.
Use Figure 32-A first to see if you are a qualified individual. If you are, go to Figure 32-B to make sure your income is not too high to take the credit.
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 2011.
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You were under age 65 at the end of 2011 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 2011.
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On January 1, 2011, 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 2011, 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.
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Figure 32-A Are You a Qualified Individual? Figure 32-B Income Limits
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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 32-B.
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 Yourself , later.
You can figure the credit yourself, or the Internal Revenue Service (IRS) will figure it for you. See Figuring the Credit Yourself next.
If you choose to have the 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 29.
If you figure the credit yourself, fill out the front of Schedule R. Next, fill out Part III of Schedule R. If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box.
| IF your filing status is ... | THEN enter on line 10 of Schedule R... | |||
| single, head of household, or qualifying widow(er) with dependent child and, by the end of 2011, you were | ||||
| • 65 or older | $5,000 | |||
| • under 65 and retired on permanent and total disability1 | $5,000 | |||
| married filing a joint return and by the end of 2011 | ||||
| • both of you were 65 or older | $7,500 | |||
| • both of you were under 65 and one of you retired on permanent and total disability1 | $5,000 | |||
| • both of you were under 65 and both of you retired on permanent and total disability2 | $7,500 | |||
| • one of you was 65 or older, and the other was under 65 and retired on permanent and total disability3 | $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 2011, you were | ||||
| • 65 or older | $3,750 | |||
| • under 65 and retired on permanent and total disability1 | $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, annuities, 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 the total of Steps 2 and 3 (line 18).
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Determine your credit (lines 19–22).
These steps are discussed in more detail next.
To figure the credit, you must first determine your initial amount using lines 10 through 12. See Table 32-1 . Your initial amount is on line 12.
Step 2 is to figure the total amount of nontaxable social security and certain other nontaxable payments you received during the year. You must reduce your initial amount by these payments.
Enter these nontaxable payments on lines 13a or 13b, and total them on line 13c. If you are married filing jointly, you must enter the combined amount of nontaxable payments both you and your spouse receive.
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Nontaxable social security payments. This is the nontaxable part of the benefits shown in box 5 of Form SSA-1099, Social Security Benefit Statement, 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 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 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 below.
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$7,500 if you are single, a head of household, or a qualifying widow(er) with dependent child,
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$10,000 if you are married filing jointly, or
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$5,000 if you are married filing separately 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 (on line 18) the amounts you figured in Step 2 (line 13c) and Step 3 (line 17).
Subtract the amount determined in Step 4 (line 18) from the amount determined in Step 1 (line 12) and multiply the result by 15% (.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:
| Applying the 5 Step Process | Amount | ||||
|---|---|---|---|---|---|
| 1) | Initial amount | $5,000 | |||
| 2) | Total nontaxable social security and other nontaxable pensions | $3,200 | |||
| 3) | Excess adjusted gross income ($14,630 − $10,000) ÷ 2 |
2,315 | |||
| 4) | Add line 2 and line 3 | 5,515 | |||
| 5) | Subtract line 4 from line 1 (Do not enter less than -0-) |
-0- | |||
You cannot take the credit because your nontaxable social security (line 2) plus your excess adjusted gross income (line 3) is more than your initial amount (line 1).
The following example illustrates the credit for the elderly or the disabled. The initial amount is taken from Table 32-1, shown earlier.
James Davis is 58 years old. In 2009 he retired on permanent and total disability, and he is still permanently and totally disabled. He got the required physician's statement in 2009, and kept it with his tax records. His physician signed on line B of the statement. This year James checks the box in Part II of Schedule R. He does not need to get another statement for 2011.
He received the following income for the year:
James' adjusted gross income is $11,500 ($11,400 + $100). He figures the credit on Schedule R as follows:
| 1) | Initial amount | $5,000 | ||
| 2) | Taxable disability pension | 11,400 | ||
| 3) | Smaller of (1) or (2) | 5,000 | ||
| 4) | Nontaxable social security benefits | $1,500 | ||
| 5) | Excess adjusted gross income ($11,500 – $7,500) ÷ 2 |
2,000 | ||
| 6) | Add lines 4 and 5 | 3,500 | ||
| 7) | Subtract line 6 from line 3 (Do not enter less than -0-) |
1,500 | ||
| 8) | Multiply line 7 by 15% (.15) | 225 | ||
| 9) | Enter the amount from the Credit Limit Worksheet in the Instructions for Schedule R |
201 | ||
| 10) | Credit (Enter the smaller of line 8 or line 9) | $201 | ||
He enters $201 on line 30 of Form 1040A. The Schedule R for James Davis is not shown.