| Pub. 17, Your Federal Income Tax |
2004 Tax Year |
Chapter 35 - Credit for the Elderly or the Disabled
This is archived information that pertains only to the 2004 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
Introduction
If you qualify, the law provides a number of credits that can reduce the tax you owe for a year. One of these credits is the
credit for the elderly
or the disabled.
This chapter explains:
You may be able to take this credit if you are:
Useful Items - You may want to see:
Publication
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524
Credit for the Elderly or the Disabled
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554
Older Americans' Tax Guide
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967
The IRS Will Figure Your Tax
You can take the credit for the elderly or the disabled if you meet both of the following requirements.
You can use Figure 35-A and Figure 35-B as guides to see if you qualify.
Use Figure 35-A first to see if you are a qualified individual. If you are, go to Figure 35-B to make sure your income is
not too high to take the
credit.
You can take the credit only if you file Form 1040 or Form 1040A. You cannot take the credit if you file Form 1040EZ.
You are a qualified individual for this credit if you are a U.S. citizen or resident and either of the following applies.
-
You were age 65 or older at the end of 2004.
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You were under age 65 at the end of 2004 and all three of the following statements are true.
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You retired on permanent and total disability (explained later).
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You received taxable disability income for 2004.
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On January 1, 2004, you had not reached mandatory retirement age (defined later under Disability income).
Age 65.
You are considered to be age 65 on the day before your 65th birthday. Therefore, if you were born on January 1, 1940,
you are considered to be age
65 at the end of 2004.
You must be a U.S. citizen or resident (or be treated as a resident) to take the credit. Generally, you cannot take the credit
if you were a
nonresident alien at any time during the tax year.
Exceptions.
You may be able to take the credit if you are a nonresident alien who is married to a U.S. citizen or resident at
the end of the tax year and you
and your spouse choose to treat you as a U.S. resident. If you make that choice, both you and your spouse are taxed on your
worldwide income.
If you were a nonresident alien at the beginning of the year and a resident at the end of the year, and you were married to
a U.S. citizen or
resident at the end of the year, you may be able to choose to be treated as a U.S. resident for the entire year. In that case,
you may be allowed to
take the credit. For information on these choices, see chapter 1 of Publication 519, U.S. Tax Guide for Aliens.
Generally, 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 did not live in the same household at any time during the tax year, you can file either joint or separate returns and
still take the credit.
Head of household.
You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first
6 months of the year, if you
meet all the tests. See Head of Household in chapter 2 for the tests you must meet.
If you are under age 65 at the end of 2004, you can qualify for the credit only if you are retired on permanent and total
disability. You are
retired on permanent and total disability if:
-
You were permanently and totally disabled when you retired, and
-
You retired on disability before the close of the tax year.
Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your
disability.
If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the
credit if you were
permanently and totally disabled on January 1, 1976, or January 1, 1977.
You are considered to be under age 65 at the end of 2004 if you were born after January 1, 1940.
Permanent and total disability.
You are permanently and totally disabled if you cannot engage in any substantial gainful activity because
of your physical or mental condition. A physician must certify that the condition has lasted or can be expected to last continuously
for 12 months or
more, or that the condition can be expected to result in death. See Physician's statement, later.
Substantial gainful activity.
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.
Substantial gainful activity is not work you do to take care of yourself or your home. It is not unpaid work on hobbies,
institutional therapy or
training, school attendance, clubs, social programs, and similar activities. However, doing this kind of work may show that
you are able to engage in
substantial gainful activity.
The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in
substantial gainful activity.
Sheltered employment.
Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment.
These qualified
locations are in sheltered workshops, hospitals and similar institutions, homebound programs, and Department of Veterans Affairs
(VA) sponsored homes.
Compared to commercial employment, pay is lower for sheltered employment. Therefore, one usually does not look for
sheltered employment if he or
she can get other employment. The fact that one has accepted sheltered employment is not proof of that person's ability to
engage in substantial
gainful activity.
Physician's statement.
If you are under age 65, you must have your physician complete a statement certifying that you were permanently and
totally disabled on the date
you retired. You can use the statement in the instructions for Schedule R (Form 1040) or Schedule 3 (Form 1040A).
You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records.
Veterans.
If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute
VA Form 21-0172,
Certification of Permanent and Total Disability, for the physician's statement you are required to keep. VA Form 21-0172 must
be signed by a person
authorized by the VA to do so. You can get this form from your local VA regional office.
Physician's statement obtained in earlier year.
If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable
to engage in any substantial
gainful activity during 2004, you may not need to get another physician's statement for 2004. For a detailed explanation of
the conditions you must
meet, see the instructions for Part II of Schedule R (Form 1040) or Schedule 3 (Form 1040A). If you meet the required conditions,
check the box on
line 2 of Part II of Schedule R (Form 1040) or Schedule 3 (Form 1040A).
If you checked box 4, 5, or 6 in Part I of either Schedule R or Schedule 3, enter, in the space above the box on line
2 in Part II, the first
name(s) of the spouse(s) for whom the box is checked.
Disability income.
If you are under age 65, you can qualify for the credit only if you have taxable disability income. Disability income
must meet both of the
following 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 instead of wages) for the time you are absent from work because of
permanent and
total disability.
Payments that are not disability income.
Any payment you receive from a plan that does not provide for disability retirement is not disability income. Any
lump-sum payment for accrued
annual leave that you receive when you retire on disability is a salary payment and is not disability income.
For purposes of the credit for the elderly or the disabled, disability income does not 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, you must consider two income limits. 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 you received. The limits are shown
in Figure 35-B, later.
If both your AGI and nontaxable pensions are less than the income limits, you may be able to claim the credit. See Figuring the Credit,
next.
If either your AGI or your nontaxable pensions are equal to or more than the income limits, you cannot take the credit.
You can figure the credit yourself (see the explanation that follows) or the IRS will figure it for you. See Credit Figured for You,
later.
Figuring the credit yourself.
If you figure the credit yourself, fill out the front of either Schedule R (if you are filing Form 1040) or Schedule
3 (if you are filing Form
1040A). Next, fill out Part III of either Schedule R or Schedule 3.
Table 35-1. Initial Amounts
| |
IF your filing status is ... |
|
THEN enter on line 10 of Schedule R (Form 1040) or Schedule 3 (Form 1040A)... |
| |
Single, head of household, or qualifying widow(er) with dependent child and, by the end of 2004,
you were
|
|
|
| |
|
• 65 or older
|
$5,000
|
| |
|
• under 65 and retired on permanent and total disability
1 |
$5,000
|
| |
Married filing a joint return and by the end of 2004
|
|
|
| |
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• both of you were 65 or older
|
$7,500
|
| |
|
• both of you were under 65 and one of you retired on permanent and total disability
1 |
$5,000
|
| |
|
• both of you were under 65 and both of you retired on permanent and total disability
2 |
$7,500
|
| |
|
• one of you was 65 or older, and the other was under 65 and retired on permanent and total
disability
3 |
$7,500
|
| |
|
• one of you was 65 or older, and the other was under 65 and not retired on permanent and total
disability
|
$5,000
|
| |
Married filing a separate return and you did not live with your spouse at any time during the year
and, by the end of 2004, you were
|
|
|
| |
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• 65 or older
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$3,750
|
| |
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• under 65 and retired on permanent and total disability
1 |
$3,750
|
| 1Amount cannot be more than the taxable disability income.
|
|
| 2Amount cannot be more than your combined taxable disability income.
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| 3Amount is $5,000 plus the taxable disability income of the spouse under age 65, but not more than $7,500.
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There are four steps in Part III to determine the amount of your credit:
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Determine your initial amount (lines 10 – 12).
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Total any nontaxable social security and certain other nontaxable pensions and disability benefits you received (lines 13a,
13b, and
13c).
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Determine your excess adjusted gross income (lines 14 – 17).
-
Determine your credit (lines 18–24 of Schedule R or lines 18 – 22 of Schedule 3).
These steps are discussed in more detail next.
Step 1. Determine Initial Amount
To figure the credit, you must first determine your initial amount. See Table 35-1.
Initial amounts for persons under age 65.
If you are a qualified individual under age 65, your initial amount cannot be more than your taxable disability income.
Step 2. Total Certain Nontaxable Pensions and Benefits
Step 2 is to figure the total amount of nontaxable social security and certain other nontaxable payments you received during
the year. (See
Nontaxable payments, later.)
Enter these nontaxable payments on lines 13a or 13b, and total them on line 13c. If you are married filing a joint return,
you must enter the
combined amount of nontaxable payments both you and your spouse receive.
Worksheets are provided in the Form 1040 or Form 1040A instructions to help you determine if any part of your social security
benefits (or
equivalent railroad retirement benefits) is taxable.
Nontaxable payments.
Include the following nontaxable payments in the amounts you enter on lines 13a and 13b.
-
Nontaxable social security payments. This is the nontaxable part of the amount of benefits shown in box 5 of Form SSA-1099,
which includes
disability benefits, before deducting any amounts withheld to pay
premiums on supplementary Medicare insurance, and before any reduction because of receipt of a benefit under workers' compensation.
Do not include a lump-sum death benefit payment you may receive as a surviving spouse, or a surviving child's insurance benefit
payments you may
receive as a guardian.
-
Social security equivalent part of tier 1 railroad retirement pension payments that is not taxed. This is the nontaxable part
of the amount
of benefits shown in box 5 of Form RRB-1099.
-
Nontaxable pension or annuity payments or disability benefits that are paid under a law administered by the Department of
Veterans Affairs
(VA).
Do not include amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from
active service in the
armed forces of any country or in the National Oceanic and Atmospheric Administration, or the Public Health Service, or as
a disability annuity under
section 808 of the Foreign Service Act of 1980.
-
Pension or annuity payments or disability benefits that are excluded from income under any provision of federal law other
than the Internal
Revenue Code.
Do not include amounts that are a return of your cost of a pension or annuity. These amounts do not reduce your initial amount.
You should be sure to take into account all of the nontaxable amounts you receive. These amounts are verified by the IRS through
information
supplied by other government agencies.
Step 3. Determine Excess Adjusted Gross Income
You also must reduce your initial amount by your excess adjusted gross income. Figure your excess adjusted gross income on
lines 14 through 17.
You figure your excess adjusted gross income as follows:
-
Subtract from your adjusted gross income (line 37 of Form 1040 or line 22 of Form 1040A) the amount shown for your filing
status in the
following list:
-
$7,500 if you are single, a head of household, or a qualifying widow(er) with a dependent child,
-
$10,000 if you are married filing a joint return, or
-
$5,000 if you are married filing a separate return and you and your spouse did not live in the same household at any time
during the tax
year.
-
Divide the result of (1) by 2.
Step 4. Determine Your Credit
To determine if you can take the credit, you must add the amounts you figured in Step 2 and Step 3.
Figuring the credit.
If you can take the credit, subtract the total of Step 2 and Step 3 from the amount in Step 1 and multiply the result
by 15%.
In certain cases, the amount of your credit may be limited. See Limit on credit, later.
Example.
You are 66 years old and your spouse is 64. Your spouse is not disabled. You file a joint return on Form 1040. Your adjusted
gross income is
$14,630. Together you received $3,200 from social security, which was nontaxable. You figure the credit as follows:
You cannot take the credit since your nontaxable social security (line 2a) plus your excess adjusted gross income (line 2b)
is more than your
amount on line 1.
Limit on credit.
The amount of credit you can claim may be limited.
Figure any limit on your credit on lines 21–24 of Schedule R or lines 21–22 of Schedule 3.
If you choose to have the Internal Revenue Service (IRS) figure the credit for you, read the following discussion for the
form you will file (Form
1040 or 1040A). If you want the IRS to figure your tax, see chapter 32.
Form 1040.
If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 32.
Form 1040A.
If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 32.
The following examples illustrate the credit for the elderly or the disabled. The initial amounts are taken from Table 35-1,
shown earlier.
Example 1.
James Davis is 58 years old, single, and files Form 1040A. In 1998 he retired on permanent and total disability, and he is
still permanently and
totally disabled. He got the required physician's statement in 1998, and kept it with his records. His physician signed on
line B of the statement.
This year James checks the box in Part II of Schedule 3. He does not need to get another statement for 2004.
He received the following income for the year:
James' adjusted gross income is $11,500 ($11,400 + $100). He figures the credit on Schedule 3 as follows:
His credit is $225. He enters $225 on line 30 of Form 1040A. The Schedule 3 for James Davis is not shown.
Example 2.
William White is 53. His wife Helen is 49. William had a stroke 3 years ago and retired on permanent and total disability.
He is still permanently
and totally disabled because of the stroke. In November of last year, Helen was injured in an accident at work and retired
on permanent and total
disability.
William received nontaxable social security disability benefits of $3,000 during the year and a taxable disability pension
of $6,000. Helen earned
$9,200 from her job and received a taxable disability pension of $1,000. Their joint return on Form 1040 shows adjusted gross
income of $16,200
($6,000 + $9,200 + $1,000).
Helen got her doctor to complete the physician's statement in the instructions for Schedule R. Helen is not required to include
the statement with
her return for the year, but she must keep it for her records.
William got a physician's statement for the year he had the stroke. His doctor had signed on line B of that physician's statement
to certify that
William was permanently and totally disabled. William has kept the physician's statement with his records. He checks the box
in Part II of Schedule R
and writes his first name in the space above line 2.
William and Helen use Schedule R to figure their $31 credit for the elderly or the disabled. They attach Schedule R to their
joint return and enter
$31 on line 48 of Form 1040. See their filled-in Schedule R and Helen's filled-in physician's statement on the previous three
pages.
Instructions for Physician's Statement
|
Taxpayer
|
1. He or she cannot engage in any substantial gainful activity because of a physical or mental condition, and
|
|
If you retired after 1976, enter the date you retired in the space provided on the statement below.
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2. A physician determines that the disability has lasted or can be expected to last continuously for at least a year or
can lead to death.
|
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Physician
|
|
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A person is permanently and totally disabled if both of the following apply:
|
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| Physician's Statement (keep for your records)
|
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I certify that
Helen A. White
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Name of disabled person
|
| |
|
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was permanently and totally disabled on January 1, 1976, or January 1, 1977, OR was permanently and
totally disabled on the date he or she retired. If retired after 1976, enter the date retired.
November 30, 2004 |
| |
|
| Physician: Sign your name on either A or B below.
|
| |
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| AThe disability has lasted or can be expected to last continuously for at least a year
|
|
| |
Physician's signatureDate
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| BThere is no reasonable probability that the disabled condition will ever improve
|
Juanita D. Doctor
2/7/05 |
| |
Physician's signatureDate
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|
Physician's name
|
Physician's address
|
| Juanita D. Doctor |
1900 Green St., Hometown, MD 20000 |
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