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Form 1040A filers. Schedule 3 (Form 1040A) is obsolete. The credit previously figured on that schedule will now be figured on Schedule R (Form 1040A or 1040).
If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled.
This chapter explains the following.
You may be able to take the credit for the elderly or the disabled if:
You can take the credit for the elderly or the disabled if you meet both of the following requirements.
You can use Figure 33-A and Figure 33-B as guides to see if you are eligible for the credit.
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.
You are considered to be age 65 on the day before your 65th birthday. Therefore, if you were born on January 1, 1945, you are considered to be age 65 at the end of 2009.
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 2009, 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:
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.
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.
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.
If you are under age 65, you must also have taxable disability income to qualify for the credit. Disability income must meet both of the following requirements.
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.
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.
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.
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, 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 30.
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 24, on line 30. If you file Form 1040, include the amount from Schedule R, line 24, 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 2009, 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 2009 | |||
| • 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 2009, you were | |||
| • 65 or older | $3,750 | ||
| • under 65 and retired on permanent and total disability1 | $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. |
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 33-1 . Your initial amount is on line 12.
If you are a qualified individual under age 65, your initial amount cannot be more than your taxable disability income.
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 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.Include the following nontaxable payments in the amounts you enter on lines 13a and 13b.
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:
To determine if you can take the credit, you must add (on line 18) 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. |
If you can take the credit, subtract the amount determined in Step 4 (line 18) from the amount determined in Step 1 (line 12) and multiply the result by 15%.
In certain cases, the amount of your credit may be limited. See Limit on credit , later.
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 of 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 33-1, shown earlier.
James Davis is 58 years old, single, and files Form 1040A. In 2004 he retired on permanent and total disability, and he is still permanently and totally disabled. He got the required physician's statement in 2004, 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 2009.
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 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 Form 1040A, line 28 | 216 | |||
| 10) | Enter any amounts from Form 1040A, line 29 | -0- | |||
| 11) | Subtract line 10 from line 9 | 216 | |||
| 12) | Credit (Enter the smaller of line 8 or line 11) | $216 |
His credit is $216. He enters $216 on line 30 of Form 1040A. The Schedule R for James Davis is not shown.
Your Federal Income Tax - Introduction
Tax Withholding and Estimated Tax
Wages, Salaries, and other Benefits
Dividends and other Corporate Distributions
Retirement Plans, Pensions, and Annuities
Social Security and Equivalent Railroad Retirement Benefits
Individual Retirement Arrangements (IRAs)
Nonbusiness Casualty And Theft Losses
Car Expenses And Other Employee Business Expenses
Tax Benefits For Work-Related Education
Tax On Investment Income Of Certain Minor Children
Child And Dependent Care Credit
Credit For The Elderly Or The Disabled
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