Table of Contents
Introduction
The IRS has made provisions within the tax laws in favor of elderly and disabled people to enhance their spending capacity. People 65 years of age or older and people who have had to retire early because of disability are now eligible for a tax credit ranging between $3,750 and $7,500. Although the tax credit lowers the federal income taxes a taxpayer must pay, several eligibility criteria need to be met. However, one must also remember that the tax credit for the elderly and disabled cannot be refunded. This implies that a taxpayer cannot claim a refund even if they have excess tax credits, in case the tax credits equal their tax bill. Let us delve deeper into this tax preparation topic and learn more about Schedule R, which allows the Elderly and the disabled to obtain this tax credit.
People who qualify for the tax credit
To avail of the tax credit for the elderly and disabled, you must meet specific criteria. However, if you file taxes jointly with your spouse, both of you need to meet the conditions for you to be able to take the credit. To obtain the elderly tax credit, you must be at least 65 as of the last date of the prevalent tax year, which is 12/31/2022. Qualification criteria related to disability state that you must have retired before the final day of the fiscal year and were disabled permanently to avail of the credit. It is also essential during the year that you must have received taxable disability income and that you retire before you attain the age of retirement stated by the employer.
However, the IRS needs the taxpayer to meet specific rules for them to be able to obtain the disability requirement. Let us discuss these requirements and understand if you are eligible for this tax credit if you are a differently-abled person.
- The taxpayer must not be equipped with enough physical capacity to do something that is substantially gainful. Substantially gainful activities include activities, physical or mental, that are profitable. More than minimum wage is required, which deems you worthy of the credit.
- A doctor must analyze the disability to make firm statements confirming the age of this disability to be more than 12 months. It is also essential that the doctor/physician comments on whether the disability would last for more than 12 months. The tax credit can also be obtained if the disability has life-threatening potential.
The taxpayer's adjusted gross income must also be within the prescribed limit.
|
Tax Filing Status |
AGI Limit |
|
Single |
$17,499 |
|
Head of Household |
$17,499 |
|
Qualifying widower with a dependent child |
$17,499 |
|
Married, with one qualifying spouse |
$19,999 |
|
Married, with both spouses qualified for the credit |
$24,999 |
|
Seperated |
$12,999 |
Table: AGI Limit for the taxpayer to be eligible for elderly and disabled tax credit
Calculation of the credit
To avail of the tax credit, the taxpayer must appropriately answer all the questions in Part 1 of Schedule R. Schedule R is divided into 3 major parts, and the first one declares the taxpayer’s age. The 2nd part declares the nature of disability of the taxpayer, while the 3rd part allows you to figure out the tax credit you are eligible for. The answers you provide in response to these questions will help you proceed further, as the 1st part determines your basis of eligibility for the tax credit. If you have a disability, you must provide medical information regarding your condition in Part 2 of Schedule R. However, if you are eligible for the tax credit based on your age, you must skip Part 2 and fill up Part 3. After this, you are required to follow these tax preparation steps:
- Figure out the predetermined amount based on your response in part 1 of Schedule R, including up to $7,500 of the taxable disability income, received by you or your spouse.
- Instructions stated on the form allow you to add up all the pensions and annuities you receive appropriately.
- Add the total from step 2, subtract the amount from your AGI, and divide the difference in half.
- Add the total from Step 3 to the pensions and annuity payments you are eligible for.
- Subtract the total of step 4 from the predetermined amount that you figured out earlier based on your responses in Part 1 and multiply the result by 15% to find out the total credit you are eligible for.
How to claim the credit
To have the tax credit subtracted from your tax bill, you would have to follow several steps during tax preparation. To claim the elderly and disabled tax credit, you must provide information regarding your calculations with the help of 2 additional forms on top of Form 1040 or your tax return. The first is the "Schedule R" form, and the second is "Schedule 3". The credit you have figured out is to be written on Schedule 3, and the box marked "C" will be selected, followed by writing "Schedule R" on the blank line next to it. The total credit amount will be provided in Line 6d within the same form, ie. Schedule 3. Following these steps will allow you to obtain the tax credit you are eligible for, irrespective of whether you file your taxes by yourself or with the help of an agency that provides tax services.
However, these calculations can get quite hectic if you need more time to carry out tax preparations. Losing out on tax credits ultimately leads to higher tax bills, which is undesirable. Therefore, it is suggested that you avail yourself of help from tax professionals who are well-trained and equipped enough to prepare accurate tax returns easily. This is where NSKT Global comes into place, as it not only makes you aware of the tax credits and deductions you are eligible for, but it also ensures that you are up-to-date with your books if you own a business and generate taxable income. Head over to the official website of NSKT Global, and find out how you can leverage the services provided by NSKT Global in your favor!
