The IRS offers a special tax benefit for qualifying individuals known as the Credit for the Elderly or the Disabled. This credit is specifically designed to help seniors and individuals with permanent disabilities reduce their federal income tax liability. While it’s often overlooked, it can provide substantial tax relief for those who meet the eligibility criteria.
In this blog, we’ll cover who qualifies for the credit, how it’s calculated, how to claim it, and tips to maximize your eligibility. If you’re aged 65 or older, or if you’re permanently and totally disabled with limited income, this credit might lower your tax bill—or even contribute to a refund.
1. What Is the Credit for the Elderly or Disabled?
This is a nonrefundable tax credit available to individuals who are either:
- Age 65 or older at the end of the tax year, or
- Under age 65 but permanently and totally disabled
The credit ranges from $3,750 to $7,500 depending on your filing status and circumstances, but the actual credit you can claim depends on your adjusted gross income (AGI) and the nontaxable part of your Social Security or other nontaxable pensions.
2. Who Qualifies for the Credit?
A. Age-Based Qualification
You qualify if you were 65 or older by December 31 of the tax year. If your birthday falls on January 1, the IRS treats you as if you turned 65 on December 31 of the prior year.
B. Disability-Based Qualification
You qualify if you are under 65 and permanently and totally disabled. According to the IRS, this means:
- You cannot engage in any substantial gainful activity because of your physical or mental condition, and
- A doctor determines the condition is expected to last continuously for at least 12 months or result in death
You must have a written statement from your doctor verifying your disability, and if the IRS requests it, you may have to submit Schedule R or Form 1040 with physician certification.
3. Income Limitations
To claim the credit, you must meet specific income limits based on your filing status. There are two tests:
A. Adjusted Gross Income (AGI) Limits
- Single, Head of Household, or Qualifying Widow(er): AGI less than $17,500
- Married Filing Jointly (One Qualifies): AGI less than $20,000
- Married Filing Jointly (Both Qualify): AGI less than $25,000
- Married Filing Separately (Lived apart all year): AGI less than $12,500
B. Nontaxable Income Limits
Your nontaxable income (like Social Security benefits, veterans’ pensions, etc.) must also fall below a certain threshold:
- Single, HOH, QW: Less than $5,000
- MFJ (One Qualifies): Less than $5,000
- MFJ (Both Qualify): Less than $7,500
- MFS (Lived apart all year): Less than $3,750
4. How Much Is the Credit Worth?
The base credit ranges are:
- Single, HOH, QW: $5,000
- MFJ (One Qualifies): $5,000
- MFJ (Both Qualify): $7,500
- MFS (Lived apart all year): $3,750
However, the credit amount is reduced by a portion of your income that exceeds certain thresholds, including part of your Social Security and pensions that aren’t taxed. So, the credit is rarely worth the full base amount.
5. How to Claim the Credit
To claim the credit, you must file a federal income tax return using Form 1040 or Form 1040-SR, and attach Schedule R: Credit for the Elderly or the Disabled.
Steps:
- Determine if you’re eligible by age or disability.
- Calculate your income limits to confirm qualification.
- Complete Schedule R to determine the allowable credit.
- Transfer the amount from Schedule R to your Form 1040 (Line 6d).
Note: If you use tax software, it will prompt you with questions to help determine eligibility and complete Schedule R for you.
6. Examples of Eligibility and Benefit
Example 1: Age-Based Qualification
Margaret is 68 years old, single, and has $14,000 in adjusted gross income and $4,000 in nontaxable Social Security. She meets both income thresholds and qualifies for the credit. Her potential base credit is $5,000, reduced by a portion of her income.
Example 2: Disability-Based Qualification
David is 59 and permanently disabled. He’s married filing jointly, and he and his wife have $22,000 in AGI, of which $6,000 is tax-exempt veterans’ pension. Only David qualifies. They meet the requirements and may qualify for a reduced portion of the $5,000 credit.
7. Common Pitfalls and Mistakes
Many people overlook this credit because it is nonrefundable (i.e., it only reduces tax owed but won’t generate a refund if you have no tax liability). Other mistakes include:
- Assuming you qualify without checking AGI and nontaxable income limits
- Forgetting to attach Schedule R
- Incorrectly reporting Social Security as taxable or nontaxable
- Filing the wrong return type (e.g., using Form 1040-EZ which doesn’t allow this credit)
8. Can You Claim the Credit If You Don’t Owe Taxes?
No. This is a nonrefundable credit, which means it can only reduce the tax you owe to zero. If you have no tax liability, you won’t benefit from this credit. However, it can be combined with other credits, like the Earned Income Tax Credit (EITC), to maximize total savings.
9. Best Practices for Claiming the Credit
- Keep records of your income, benefits, and disability status
- Review your AGI and nontaxable income each year
- Consult a tax preparer or software to determine eligibility
- Attach Schedule R and double-check Form 1040 entries
10. Conclusion: A Valuable but Overlooked Tax Benefit
The Credit for the Elderly or the Disabled provides meaningful tax relief for those on limited income who are older or permanently disabled. While not every senior qualifies—especially those with higher pensions or Social Security—those who do can reduce their tax liability significantly.
If you think you may be eligible, don’t ignore this valuable credit. Review your income, complete Schedule R, and ensure your eligibility every year. A small effort can lead to significant tax savings—especially for those in retirement or facing physical challenges.
