Frequently Asked Questions - Credit for the Elderly
Q: I am 100% disabled. What tax breaks can I or should I have been using?
A: If you have taxable income, your unreimbursed out-of-pocket medical expenses are deductible on Schedule A, subject to the 7 1/2% exclusion and provided you are better off itemizing than taking the standard deduction. If you have no taxable income, there are no tax credits available.
The only federal tax credit you possibly could be eligible for is the Credit for The Elderly or Disabled. Your total income, including any nontaxable social security benefits, would need to be quite low for this credit to apply. The formula for determining eligibility and the amount of credit is a little too complex for this forum. See Schedule R (for Form 1040) and its instructions to see if you qualify. Also you can read IRS Pub 524. It explains the credit and has examples.
http://www.irs.gov/publications/p524/index.html
Also check the instructions for your state income tax. Some states have tax benefits for persons who are disabled.
Q: I am a widow collecting a small survivor pension from Social Security of $3000 and I make around $10,000 working part-time in a bakery. That is not a lot of income yet I have to pay income tax. Is there some deduction or credit I can use to lower my taxes?
A: If you will be at least age 65 by year-end and are a citizen or resident of the U.S., you may be eligible for the Credit for the Elderly or Disabled.
You state that your SSA benefits are under $5000 and you earn $10,000 working part-time. As long as your AGI (adjusted gross income) is under $17,500 you would qualify for the credit. AGI includes all of your taxable gross income (wages, interest, dividends, pensions, etc.) less any allowed adjustments to gross income such as an IRA deduction. If you look at the Form 1040A front page, you will see what elements make up AGI.
The credit is computed on either Schedule R if you use Form 1040 or Schedule 3 if you use Form 1040A.
More information on this credit is available in IRS Publication 554, Older Americans' Tax Guide.
You can obtain IRS forms and pubs online at http://www.irs.gov. Just follow the links to Forms and Publications.
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