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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.
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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.
