Elderly or Disabled Tax Credit
A tax credit may be available if you are 65 years of age prior to December 31, 2009 or under 65 but retired and were permanently and totally disabled on the date you retired. Regrettably, this credit is not as significant as some of the other tax credits that are available to qualifying individuals. Notwithstanding the size of the credit, like any tax credit, it should not be overlooked since it could result in some unanticipated cash for you.
How the Elderly Credit Works The credit is equal to 15% of an applicable “initial” amount based on an individual’s filing type i.e. $5,000 for a single individual, $7,500 for married taxpayers filing a joint return where both spouses are qualified. The initial credit is then reduced by certain nontaxable pensions and benefits such as pension ,disability benefits or annuities that are not included in adjusted gross income. The initial credit is then further reduced by one half of the excess of the individual ’s adjusted gross income over certain predetermined levels, based on the individual ’s filing status. The levels are single taxpayer is $7,500, married taxpayers is $10,000 and married taxpayers individually filing separately is $5, 000.The credit is calculated by multiplying the adjusted “initial” amount by 15%.
Nontaxable Benefits and Pensions You should be cautious when listing the nontaxable amounts received and reflected on your tax return. These amounts are confirmed with information supplied by other government agencies by the Internal Revenue Service. Nontaxable benefits and pensions examples are (a)nontaxable pension or annuity payments or disability benefits that are paid under a law administered by the V.A.,(b) nontaxable railroad retirement pension payments treated as social security,(c)nontaxable social security payments, and (d)annuity or pension payments or disability benefits which not included in income pursuant to any provision of federal law other than the Internal Revenue Code.
How to Determine the Disability Credit For taxpayers who are permanently and totally disabled and under the age of 65 by the end of the year, the applicable “initial” amount may not exceed the amount of the disability income you received during 2009. There are special rules to compute the “initial” amounts when one spouse is under the age of 65 and to determine and support the permanently and totally disability status that is being claimed.
Credit Limitations In order to determine if you are entitled to the credit, you must consider two income limits. The first income limit is the amount of the taxpayer’s adjusted gross income. The second income limit is the amount of non-taxable Social Security and other non-taxable pensions you received during the year. The amount of credit you can claim is generally limited to the amount of the tax. You may not take this credit if your adjusted gross income(AGI) is equal to and is greater than (a)if single, head of household or qualifying widow(er) with dependent child, the AGI is $17,500, (b)If married filing jointly and one spouse is eligible for the credit the amount the AGI is $20,000. If married filing jointly and both spouses are eligible for the credit the AGI is $25,000. If married filing separately or depending on your filing status the AGI is $12,500, you cannot take the credit if you received certain nontaxable benefits ranging from $3,750 to $7,500.
To Claim the Credit Unfortunately,the credit is not available for taxpayers that file Form 1040EZ. In this case, then you need to file Form 1040 or Form 1040A and attach Schedule R.
Tax laws are complex, change constantly and each situation is unique. This article is not intended to provide legal or accounting advice. The reader should perform his or her own due diligence and consult competent professionals in this area. Special rules exist to determine certain exclusions,amount of the credits and the proper filing status. Please refer to the Internal Revenue Service Publication 52 for more detailed information.
For more information about how we can help you determine if you are eligible for the Elderly or Disabled Tax Credit and other available income tax credits and about our reasonably priced paperless and internet based approach to tax preparation at affordable prices . Sandor(Sandy) E. Lenner,M.B.A. – C.P.A. has provided accounting and business services for over 35 years and works part-time at his wife’s CPA firm
Related posts:
- Child Tax Credit Covers More Taxpayers Taxpayers who have dependent children that are younger than 17...
- Disability Aids Are Of Great Help To The Disabled Disability aids help to narrow down the gap between what...
- Tips on How to Buy a Car With Bad Credit But as often said, there is always a solution to...
- What To Do For Business Credit What do you think a business man will do once...
- Relief From Credit Card Collectors – Credit Card Debt Forgiveness Program There's a commotion today not only in the States purchasers...