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Do You Qualify for a Tax Credit for the Elderly or Disabled?

People over 65 or retired on permanent disability could get a big break

The Amount You Owe box from a 1040 income tax form

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En español | In the world of taxes, deductions are good things: They reduce your taxable income, which, in turn, lowers the amount of tax you pay.

Tax credits, on the other hand, are things of wonder. They reduce your tax bill directly, dollar for dollar. If you fit the requirements, the credit for the elderly or the disabled could really brighten your tax day.

This tax credit ranges from $3,750 to $7,500, depending on your income and filing status. If you owe $4,000 in taxes before the credit and you get a $3,750 credit, your tax bill will be just $250. Note, however, that this particular tax credit is nonrefundable, in the parlance of the IRS, meaning if the credit you get is more than the tax you owe, you won't get a check for the difference. On the other hand, you won't owe any taxes, which is nice.

Qualifying for the tax credit

It's not easy to get this tax credit. The easy part first: You can qualify if you're a U.S. citizen or a resident alien. You also might qualify if you're a nonresident alien married to a U.S. citizen.

To qualify based on age as an “elderly” person, you must be 65 or older by the end of the tax year. In a quirk of the tax law, you are considered to be age 65 on the day before your 65th birthday. As a result, if you were born on Jan. 1, 1955, you are considered to be age 65 at the end of 2019.

If you're younger than 65, you may qualify for the credit as “disabled” if you retired on permanent and total disability and you received taxable disability income in 2019, and if you have not yet reached your employer's mandatory retirement age.

More specifically, you will need a note from a qualified physician that you can't engage in any substantial gainful activity because of your physical or mental condition. The doctor must say that your condition can be expected to last 12 months or more, or that you will die from it. “Substantial gainful activity” basically means the ability to earn at least the minimum wage rate from an employer. It doesn't mean keeping the house tidy, buying groceries or having a hobby. Work at subminimum wage as part of working at so-called sheltered workshops for the disabled isn't considered substantial gainful activity, either.

As for the taxable disability income, it could come from an employer's accident plan, health plan or pension plan, for example. It could also be income included in your wages as time off because of permanent and total disability.

Throughout tax season, check for the latest updates and resources  

Passing the income tests

Even if you meet these qualifications, there are still income restrictions to get past.

For single filers, your 2019 adjusted gross income (the amount on Form 1040 or 1040-SR, line 8b) can't be $17,500 or above. That's the first part. The second part — and again, for single filers — is that the total of your nontaxable Social Security benefits and other nontaxable pensions can't be $5,000 or above. If you fail either one of these income tests, you don't get a tax credit. These same income limits also apply if your filing status is head of household or a qualifying widow.

The limits are different for married filing statuses. You pass the income tests if:

  • You are married, filing jointly, and only one spouse qualifies for the credit, and AGI is less than $20,000 and nontaxable Social Security and other income is less than $5,000.
  • You are married, filing jointly, and both spouses qualify, and AGI is less than $25,000 and other income is less than $7,500.
  • You are married, filing separately, you lived apart from your spouse for all of 2019, and AGI is less than $12,500 and other income is less than $3,750.

If this all seems complex, it is. For help, try this IRS online tool to see if you qualify for the tax credit. You can also consult your personal tax adviser, try tax software or visit an AARP Foundation Tax-Aide location. You'll need to use Schedule R to calculate and claim your tax credit for the elderly or the disabled.