What Is the Tax Credit for the Elderly or the Disabled?

By Maurie Backman Markets Fool.com

Seniors today face a world of expenses, from housing to transportation to healthcare. Similarly, those who are disabled often have difficulty making ends meet, especially when their conditions render them unable to work. Thankfully, the IRS offers some relief in the form of a tax credit for the elderly or the disabled. If you're 65 or older, or if you have a disability, and your income is low enough, you may be eligible for this helpful tax break.

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IMAGE SOURCE: GETTY IMAGES.

How tax credits work

Unlike deductions, which lower the amount of your income subject to taxes, a tax credit is a dollar for dollar reduction of your tax liability. If you're eligible for a $2,000 tax credit, your tax bill will automatically be reduced by that amount regardless of how much you earn or your effective tax rate. That said, most tax credits come with strict income limits, so they're typically harder to qualify for than deductions.

Eligibility

To qualify for the tax credit for the elderly or disabled, you must either be:

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  • 65 or older by the end of the tax year you're claiming the credit for, or
  • Retired on permanent and total disability with taxable disability income

Note that even if you don't retire formally, you may be considered to be retired on disability once your condition renders you unable to work.

Income limits

While the credit for the elderly and disabled can be a financial lifeline of sorts for those who need the tax break, most people earn too much money to qualify. You can use the following table to determine whether you'll qualify for the credit based on your income:

Tax Filing Status

Adjusted Gross Income Limit

Nontaxable Social Security, Pension, Annuity, or Disability Income Limit

Single, head of household, or qualifying widow(er) with dependent child

$17,500

$5,000

Married filing jointly with one qualifying spouse

$20,000

$5,000

Married filing jointly with two qualifying spouses

$25,000

$7,500

Married filing separately, and both spouses lived apart during the year

$12,500

$3,750

DATA SOURCE: IRS.

Note that if your income exceeds the limit in either category above, you won't be eligible to take the credit. So if, for example, you're over 65, your tax filing status is single, your adjusted gross income is $16,000, but your nontaxable Social Security benefits equal 6,000, you won't qualify.

Claiming your credit

If you do wind up being eligible to claim the credit for the elderly or disabled, you might reduce your taxes by $3,750 to $7,500. However, keep in mind that because the credit isn't refundable, the most it can do is lower your tax liability to zero. Some credits are refundable, which means that if they reduce your taxes to a negative balance, you'll get a check for the difference. Unfortunately, that provision doesn't apply here, so even if the credit for the elderly or disabled knocks your balance down to below $0, you won't get the difference refunded.

If you're struggling to keep up with your bills as a senior, you should know that there are several tax breaks available for retirees that can be a big help. If you don't qualify for the credit for the elderly or disabled, it pays to see what other options might help you lower your tax burden.

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