34.7 Claiming the Credit for the Elderly and Disabled

You may qualify for a tax credit for 2012 if your income is quite low and you meet one of the following conditions:

• Your 65th birthday is on or before January 1, 2013; or
• You were under age 65 at the end of 2012, you retired before the end of 2012 because of permanent and total disability, and you received taxable disability income in 2012 from your former employer’s disability plan. Disability income is taxable wages or payments in lieu of wages paid to you while you are absent from work because of permanent and total disability. Qualifying disability income does not include payments received after reaching mandatory retirement age.

You will not be able to claim a credit if your Social Security benefits or adjusted gross income is too high, or if you have no tax liability (34.9).

Disabled.

You are considered permanently and totally disabled if you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months.

For the first year you claim the credit, you need a physician’s certification of your disability. For later years, new certifications are generally not required.

Nonresident aliens.

You may not claim the credit if you are a nonresident alien at any time during 2012, unless you are married to a citizen or resident and you have elected to be treated as a resident (1.5).

Amount of credit.

The amount of the credit is 15% times the base amount after reductions. The base amount for the credit is generally $7,500, $5,000, or $3,750 (34.8). The base amount is reduced by nontaxable Social Security and other tax-free pensions, as well as by adjusted gross income exceeding specific limits (34.9).

The credit is not refundable. That is, it is allowed only up to your tax liability (34.9).

How to claim the credit.

You claim the credit on Schedule R if you file Form 1040 or Form 1040A. You may not claim the credit on Form 1040EZ.

Married couples.

A married couple may claim the credit only if they file a joint return. However, if a husband and wife live apart at all times during the taxable year and file separately, the credit may be claimed on a separate return.

Law Alert

Lack of Inflation Adjustment Weakens Credit

Since 1983, the base amounts (34.8) and AGI phase-out thresholds (34.9) for figuring the credit for the elderly or disabled have remained the same while inflation adjustments and tax law changes have reduced tax liability. Since the credit cannot exceed tax liability, the number of taxpayers able to claim the credit has dropped drastically and continues to decline annually.

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