The Elderly And Disabled Tax Credit is a credit that reduces the tax liability on qualifying elderly and disabled wage earners. Rather than allow seniors to be taxed beyond what they can reasonably pay, this credit helps to reduce their taxable income. While this is a way to lower or even eliminate the need for the elderly or disabled person to pay taxes, the credit is limited to the amount of income tax due. In other words, you cannot use the credit to make money through an excess credit refund; it will only go far enough to cover what is due to the IRS.
How to Qualify for the Credit
There are certain requirements that have to be met before someone is eligible for the tax credit. If you are choosing to file taxes along with your spouse, then they will also need to meet the requirements to receive the benefits. If you live with your spouse but file separately, you will not be able to qualify for this credit. If you are filing as someone elderly, you must be at least 65-years-old by the end of the tax year.
If you are claiming the credit as someone disabled, you will be expected to meet the following requirements:
1. Before you retired, you must have already been totally and permanently disabled.
2. You must be eligible and receive taxable disability during the tax year.
3. Before the beginning of the current tax year, you must have been younger than your employer’s age for retirement.
To claim the disability credit, you must meet all three of the requirements.
Each year, the IRS puts together a list of income guidelines. If someone has earned more than the limit in a year, they will not be able to claim the Elderly and Disabled credit.
Filling Out Schedule R
After you ensure that you qualify for this credit, you will need to complete the Schedule R to claim it. The first part of Schedule R will cover questions about your age and disability status. Those who are disabled will be directed to Part 2 where you will need to verify your medical condition. If you are older than 65, you can skip Part 2 and go straight to figuring your credit in Part 3.
Figuring Your Tax Credit
With the simple steps included on the form, you will be expected to subtract your disability from your gross income, divide the result in half and then add any pensions and annuities. You will then take the numbers from Step 4 and subtract them, and finish by multiplying the result from Step 5 by 15 percent to determine your credit. If your credit is going to be larger than your tax liability, you are limited to claiming only what equals your tax.
Once you’ve discovered the amount of your credit, write your allowable credit on Line 53 of Form 1040, select box “C” and fill out “Schedule R” on the empty line. The Elderly and Disability amount will then be deducted from the amount you owe the IRS. Send the completed Schedule R to the IRS when you send in your tax return.
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