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Credit for the Elderly or the Disabled, Publication 524 (2009)
What's New
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 Schedule 3 (Form 1040A) is obsolete.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).
Introduction
If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled.
This publication explains:
- Who qualifies for the credit for the elderly or the disabled, and
- How to figure the credit.
You may be able to take the credit for the elderly or the disabled if:
- You are age 65 or older, or
- You retired on permanent and total disability and have taxable disability income.
Useful Items - You may want to see:
Publication
Form (and instruction)
- Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled
See How To Get Tax Help near the end of this publication, for information about getting these publications and form.
Are You Eligible for 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 Figures A and B as guides to see if you are eligible for the credit. Use Figure A first to see if you are a qualified individual. If you are, go to Figure 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 alien, and either of the following applies.
- You were age 65 or older at the end of 2009.
- You were under age 65 at the end of 2009 and all three of the following statements are true.
- You retired on permanent and total disability (explained later).
- You received taxable disability income for 2009.
- On January 1, 2009, 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, 1945, you are considered to be age 65 at the end of 2009.
U.S. Citizen or Resident Alien
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.
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 alien at the end of the tax year and you and your spouse choose to treat you as a U.S. resident alien. If you make that choice, both you and your spouse are taxed on your worldwide incomes. 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. 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 following tests.
- You file a separate return.
- You paid more than half the cost of keeping up your home during the tax year.
- Your spouse did not live in your home at any time during the last 6 months of the tax year and the absence was not temporary. (See Temporary absences in Publication 501.)
- Your home was the main home of your child, stepchild, or an eligible foster child for more than half the year. An eligible foster child is a child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
- You can claim an exemption for that child, or you cannot claim the exemption only because the noncustodial parent can claim the child using the rules for children of divorced or separated parents.
For more information, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Under Age 65
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:
- 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 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 2009 if you were born after January 1, 1945. 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. The following examples illustrate the tests of substantial gainful activity.
Example —
Trisha, a sales clerk, retired on disability. She is 53 years old and now works as a full-time babysitter for the minimum wage. Even though Trisha is doing different work, she is able to do the duties of her new job in a full-time competitive work situation for the minimum wage. She cannot take the credit because she is able to engage in substantial gainful activity.
Example —
Tom, a bookkeeper, retired on disability. He is 59 years old and now drives a truck for a charitable organization. He sets his own hours and is not paid. Duties of this nature generally are performed for pay or profit. Some weeks he works 10 hours, and some weeks he works 40 hours. Over the year he averages 20 hours a week. The kind of work and his average hours a week conclusively show that Tom is able to engage in substantial gainful activity. This is true even though Tom is not paid and he sets his own hours. He cannot take the credit.
Example —
John, who retired on disability, took a job with a former employer on a trial basis. The purpose of the job was to see if John could do the work. The trial period lasted for 6 months during which John was paid the minimum wage. Because of John's disability, he was assigned only light duties of a nonproductive “make-work” nature. The activity was gainful because John was paid at least the minimum wage. But the activity was not substantial because his duties were nonproductive. These facts do not, by themselves, show that John is able to engage in substantial gainful activity.
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Example —
Joan, who retired on disability from a job as a bookkeeper, lives with her sister who manages several motel units. Joan helps her sister for 1 or 2 hours a day by performing duties such as washing dishes, answering phones, registering guests, and bookkeeping. Joan can select the time of day when she feels most fit to work. Work of this nature, performed off and on during the day at Joan's convenience, is not activity of a “substantial and gainful” nature even if she is paid for the work. The performance of these duties does not, of itself, show that Joan is able to 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 the 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. 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 2009, you may not need to get another physician's statement for 2009. For a detailed explanation of the conditions you must meet, see the instructions for Part II of Schedule R. If you meet the required conditions, check the box on line 2 of Part II of Schedule R. If you checked box 4, 5, or 6 in Part I of Schedule R, 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 must also have taxable disability income to qualify for the credit. 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.
Table 1.Initial Amounts
| 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 |
| 1 Amount cannot be more than the taxable disability income. | |
| 2 Amount cannot be more than your combined taxable disability income. | |
| 3 Amount is $5,000 plus the taxable disability income of the spouse under age 65, but not more than $7,500. | |
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 B.
If both your AGI and your 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. Credit Figured for You
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 can take the credit and you want the IRS to figure the credit for you, attach Schedule R to your return. Check the appropriate box in Part I of Schedule R and fill in Part II and lines 11 and 13 of Part III, if they apply to you.
If you file Form 1040A, enter “CFE” in the space to the left of Form 1040A, line 30. If you file Form 1040, check box c on Form 1040, line 53, and enter “CFE” on the line next to that box. Attach Schedule R to your return.
Figuring the Credit Yourself
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.
There are five steps in Part III to determine the amount of your credit:
- Determine your initial amount (lines 10–12).
- Determine the total of any nontaxable social security and certain other nontaxable pensions and benefits you received (lines 13a, 13b, and 13c).
- Determine your excess adjusted gross income (lines 14–17).
- Determine the total of steps 2 and 3 (line 18).
- Determine your credit (lines 19–24).
These steps are discussed in more detail next.
Step 1. Determine Initial Amount
To figure the credit, you must first determine your initial amount using lines 10 through 12. See Table 1 . Your initial amount is on line 12.
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. 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.
- Nontaxable social security payments. This is the nontaxable part of the 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.)
- 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.
- 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 14–17.
You figure your excess adjusted gross income as follows:
- Subtract from your adjusted gross income (Form 1040A, line 22 or Form 1040, line 38) 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),
- $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 the Total of Steps 2 and 3
To determine if you can take the credit, you must add (on line 18) the amounts you figured in Step 2 and Step 3.
Step 5. Determine Your 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.
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:
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).
Limit on credit.
The amount of credit you can claim is generally limited to the amount of your tax. For more information, see the instructions for Part III,
Schedule R.
Examples
The following examples illustrate the credit for the elderly or the disabled. The initial amounts are taken from Table 1. Initial Amounts .
Example —
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 line 1 or line 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 amount 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.
Example —
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 $2,800 during the year and a taxable disability pension of $6,200. Helen earned $11,100 from her job and received a taxable disability pension of $1,700. Their joint return on Form 1040 shows adjusted gross income of $19,000 ($6,200 + $11,100 + $1,700). They do not itemize deductions. They do not have any amounts that would increase their standard deduction.
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 their 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 the box on line 2.
William and Helen use Schedule R to figure their $30 credit for the elderly or the disabled. They attach Schedule R to their Form 1040 and enter $30 on line 53. They check box c on line 53 and enter “Sch R” on the line next to that box. See their filled-in Schedule R and Helen's filled-in physician's statement, later.
Page 1 of Schedule R for the Whites
Page 2 of Schedule R for the Whites
| Instructions for Physician's Statement |
| |
| Taxpayer | Physician |
| If you retired after 1976, enter the date you retired in the space provided on the statement below. | A person is permanently and totally disabled if both of the following apply: |
| 1. He or she cannot engage in any substantial gainful activity because of a physical or mental condition. |
| 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's Statement | |
|
| 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 1, 2009 |
|
| 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 | Juanita D. Doctor2/8/10 |
| Physician's signatureDate |
| Physician's name | Physician's address |
| Juanita D. Doctor | 1900 Green St., Hometown, MD 20000 |
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