Elder Law Newsletter
Federal Tax Help for the Elderly and Disabled
There are numerous laws and programs that benefit elderly taxpayers on local, state and national levels. Among them is a direct federal tax credit for elderly and disabled taxpayers. This particular tax credit includes a provision that allows one who supports an elderly person to claim him as a dependent, but this article focuses on the provisions that directly benefit the elderly and disabled.
Federal Tax Forms from the Internal Revenue Service
Before discussing the Elderly and Disabled Credit (E & D Credit), it is important to understand the differences and distinctions among typical Internal Revenue Service (IRS) tax forms. The IRS provides several alternative tax forms, one of which must be filed with the IRS each year by those with sufficient income:
- 1040EZ – The 1040EZ is the easiest of the forms and is generally used by individuals filing as “single” or “married filing jointly,” claiming no dependents. Such individuals generally have taxable income of $50,000 or less only from wages, salaries, tips, taxable scholarships or grants, unemployment compensation or certain dividends — with no more than $1,500 in interest income and having no itemized deductions or credits.
- 1040A – The 1040A is generally used by many who do not qualify for filing Form 1040EZ. This includes taxpayers who generally have taxable income of $50,000 or less. However, this figure also includes income from additional sources and does not allow itemized deductions. Yet, unlike 1040EZ, it allows certain “adjustments to income” and “credits” (including credit for the elderly or disabled).
- 1040 – The 1040 is the most complicated of the three. Generally, it provides the most opportunities for tax deductions and permits listing tax credits and income adjustments. The 1040 has no income limitation and must be used if there are certain types of income, such as self-employment, unreported tips, partnership distributions, capital gains distributions, or foreign trust distributions. In addition, it must be used if the taxpayer had a foreign bank and/or securities account with a combined value of over $10,000.
Qualification for Tax Credit for the Elderly and Disabled
To be qualified for the “Elderly and Disabled” credit (E&D), the taxpayer must usually be a citizen or resident, have adjusted gross income or nontaxable social security and pension income below specified amounts (depending on filing status, such as “single,” etc.) and be either:
- 65 years or older at the end of the tax year for which the credit is claimed
- Under 65, but retired and on permanent and total disability, having received taxable disability income for the tax year for which the credit is claimed — and, as of January 1 of that tax year, had not reached mandatory retirement age
Claiming the E&D Credit
The E&D Credit may be taken by taxpayers using Form 1040 or Form 1040A, but not Form 1040EZ. In general, persons married at the end of the taxable year must file a joint return to take the credit, but married persons filing separately may also take advantage of the credit in certain circumstances. Disabled persons under 65 who wish to claim the credit must get a physician’s statement certifying permanent and total disability at the time of retirement (this need not be filed, but must be kept with tax records).
A “schedule” is provided for calculating the credit, which also requires that the taxpayer check boxes regarding qualifications. This is an additional form that must be included when filing the basic form. For the E&D credit, “Schedule R” should be used. The E&D Credit is listed on this form as a “credit.” As such, it is subtracted directly from the tax amount that would otherwise be owed, as opposed to a “deduction” (which only reduces the amount of income subject to tax).
There is a free Tax Counseling for the Elderly (TCE) program to assist elderly persons, if tax preparation problems are encountered. This program is federally funded and enables local groups to provide the service. Alternatively, the IRS can calculate the credit for the taxpayer. To have the IRS calculate the credit, attach Schedule R to the return and check the appropriate box, and check the appropriate box and enter CFE on form 1040 (line 53) or 1040A (line 30). It is strongly recommended that individuals consult an attorney or accountant to ensure they qualify for the credit and calculate it correctly.
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