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You may have heard about the special credit for senior taxpayers called the Credit for the Elderly or the Disabled, also known as The Senior Tax Credit, but you probably don’t know it is actually one of the alphabetic schedules, more precisely Schedule R, and also our next stop on the journey through the schedules to Form 1040.
Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed. Even if this credit is not a source of new funds or specifically funding for eldercare, it represents additional disposable income to reduce the overall cost of caring for an aging loved one. |
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While a taxpayer may qualify for a larger credit under this provision, the IRS limits the allowable credit to the amount of income tax due. If your credit exceeds your income tax, you will not be able to receive the excess credit as a refund.
The credit is based on your filing status, age, and income. If you are married and filing a joint return, it is also based on your spouse's age and income. You may be able to take this credit for 2018 if either of the following applies.
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| 1. |
You were age 65 or older at the end of 2018, or
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| 2. |
You were under age 65 at the end of 2018 and you meet all of the following. |
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| a. |
You were permanently and totally disabled on the date you retired. If you retired before 1977, you must have been permanently and totally disabled on January 1, 1976, or January 1, 1977.
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| b. |
You received taxable disability income for 2018. |
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| c. |
On January 1, 2018, you hadn't reached mandatory retirement age (the age when your employer's retirement program would have required you to retire).
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You are considered age 65 on the day before your 65th birthday. As a result, if you were born on January 1, 1954, you are considered to be age 65 at the end of 2018.
You must be a U.S. citizen or resident alien (or be treated as a resident alien) to take the credit. Generally, you can't take the credit if you were a nonresident alien at any time during the tax year.
If you were a nonresident alien at any time during 2018, you may be able to take the credit only if your filing status is married filing jointly.
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 didn't live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit.
If your filing status is married filing separately and you lived with your spouse at any time during 2018, you can't take the credit.
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| If you are preparing a return for someone who died in 2018, consider the taxpayer to be age 65 at the end of 2018 if he or she was age 65 or older on the day before his or her death. For example, if the taxpayer was born on February 14, 1953, and died on February 13, 2018, the taxpayer is considered age 65 at the time of death. However, if the taxpayer died on February 12, 2018, the taxpayer isn’t considered age 65 at the time of death. |
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| A person is permanently and totally disabled if both 1 and 2 below apply. |
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- He or she can't engage in any substantial gainful activity because of a physical or mental condition.
- A qualified physician determines that the condition has lasted or can be expected to last continuously for at least a year or can be expected to result in death.
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Even if you don't retire formally, you may be considered retired on disability when you have stopped working because of your disability.
If you are under age 65, you also must have taxable disability income to qualify for the credit. |
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Disability income must meet the following two 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 in lieu of wages) for the time you are absent from work because of permanent and total disability.
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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.
Any payment you receive from a plan that doesn't provide for
disability retirement isn't disability income. Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and isn't disability income.
For purposes of the credit for the elderly or the disabled, disability income doesn't 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, along with the filing status, you must consider two income limits. |
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| Filing Status |
AGI |
OR |
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Single, head of household, or qualifying widow(er)
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$17,500 or more |
$5,000 or more of nontaxable SS or other nontaxable pensions, annuities, or disability income
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| Married filing jointly and only one spouse is eligible for the credit |
$20,000 or more |
$5,000 or more of nontaxable SS or other nontaxable pensions, annuities, or disability income |
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| Married filing jointly and both spouses are eligible for the credit |
$25,000 or more |
$7,500 or more of nontaxable SS or other nontaxable pensions, annuities, or disability income |
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| Married filing separately and you lived apart from your spouse for all of 2018 |
$12,500 or more |
$3,750 or more of nontaxable SS or other nontaxable pensions, annuities, or disability income |
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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, annuities, or disability income you received.
If your AGI and your nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit.
If you figure the credit yourself, fill out the front of Schedule R. Next, fill out Schedule R, Part III.
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, 13a, and 13b of Part III, if they apply to you.
The credit ranges between $3,750 and $7,500. The amount of credit you can claim is generally limited to the amount of your tax. Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited.
To get additional information about this credit, you can go to 2018 Instructions for Schedule R , or to Publication 524, Credit for the Elderly or the Disabled, and Publication 554, Tax Guide for Seniors.
You can also check the questionnaire on the IRS webpage called Do I Qualify for the Credit for the Elderly or Disabled? which can more easily help you determine if you or someone close to you are entitled to this credit. |
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This tax credit is only applied to the tax return of the filer and, therefore, would not apply if the qualifying senior was listed as a dependent on someone else's tax returns. However, in some cases it may be advantageous for a senior to be claimed as a dependent as there are other tax benefits that may apply to the filer, including deductions for medical and dental expenses and home care or adult care costs.
Even more advantageous and consistent with our advice, is to get help from a tax professional when it comes to your tax return and in all your dealings with the IRS, to make sure you minimize your tax liability, and take advantage of all the credits and deductions you are entitled to. |
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