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Guide to Schedule R: Tax Credit for Elderly or Disabled

Updated for Tax Year 2014


OVERVIEW

The Internal Revenue Service extends a special credit to older taxpayers called the Credit for the Elderly or the Disabled. This tax break allows individuals and couples to reduce the amount of their income tax by their allowable credit. 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.


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Qualifications for the credit

To claim the credit for the elderly or the disabled, you’ll have to meet specific qualifications. If you’re filing a joint return with your spouse, your spouse must also meet these conditions.

First, you must be either elderly or disabled. To meet the age test, you must be at least 65 years of age by the end of the tax year.

If you’re disabled, you must meet all three of these requirements to qualify:

  1. You must have been permanently and totally disabled before you retired
  2. You must receive taxable disability income during the year
  3. You must be younger than your employer’s mandatory retirement age before the beginning of the tax year.

The IRS also establishes income guidelines for each tax year. Taxpayers who earn more than the income limit cannot claim the credit for that year. Couples who file separate returns but live together during the year do not qualify for the credit.

Completing Schedule R

If you meet the IRS qualifications, you’ll need to complete Schedule R to claim your credit. In Part 1 of Schedule R, answer the form questions relating to your age and disability status. Your answers in that section determine what part of the form you’ll complete next. If you are disabled, you’ll go on to Part 2 to verify your medical condition. If you meet the age standard, you can skip Part 2 and go on to figure your credit in Part 3.

When you use TurboTax to prepare your taxes, you’ll just need to answer some simple questions and we’ll fill in all the right forms for you.

Figuring your credit

To figure your credit do the following:

  1. Enter a predetermined amount based on your answers in Part 1. This amount will include up to $5,000 of any taxable disability income you or your spouse received during the year.
  2. Follow the form instructions to include payments from pensions or annuities in this total.
  3. Subtract this number from your adjusted gross income for the year and then divide the result in half.
  4. Add this number to the total of your pension and annuity payments.
  5. Subtract the result of step 4 above from the predetermined amount you entered earlier.
  6. Multiply the result from step 5 by 15 percent to find your credit for elderly and disabled.
  7. If the final number is larger than your tax liability, you can only claim the amount of your credit that equals your tax.

Again, if you use TurboTax, we’ll handle all these calculations for you, behind the scenes and tell you how much of the credit you are qualified to receive.

Claiming the credit and submitting the form

When you’re ready to claim the credit, transfer your allowable credit to Line 53 of Form 1040. After you enter the figure, select the box marked “C” and write in “Schedule R” on the blank line. The credit will be then subtracted from your total tax liability. Submit the completed Schedule R to the IRS along with your income tax return (TurboTax will do this for you).

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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