Federal Tax Credit for the Elderly and Disabled

Definition	Qualifications	Costs
Pros & Cons	Benefit Types & Limits	How to Apply
Overview of the Tax Credit for the Elderly and Disabled
While much of this information is relevant year over year, the following information has been reviewed and is accurate for the tax year 2012, which is filed in the calendar year 2013.

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Tax Credits are credits applied to the taxes you owe. If you owe $3,000 in taxes and you have a credit for $500, then you only have to pay $2,500. The Tax Credit for the Elderly and Disabled is a credit for persons over 65, or under 65 and disabled.

While a tax credit is not a source of new funds, it represents additional disposable income and can be used to reduce the overall cost of long-term care. When combined with other options, it might make the difference between home care and assisted living.

The Tax Credit for the Elderly and Disabled is a credit applied to a tax filer’s return, therefore an elderly individual such as an aging parent claimed as a dependent on someone else’s tax return is not eligible.

For some families, depending on their individual tax situation, it may be advantageous to forego the Elderly and Disabled Tax Credit and have the elderly individual claimed as a dependent on the tax return of an adult child.  The following three other tax related options may also help indirectly reduce the cost of eldercare.

• Tax Deductions of an Elderly Dependent’s Medical Expenses
  
• Federal Tax Credits for Elderly Dependent Care
  
• State Tax Credits for Elderly Dependent Care
  

It can be difficult to determine how to structure one’s expenses and choose between the available tax credits and deductions to get the greatest tax savings. Online tax preparation services such as TurboTax Calculators and Tips can greatly facilitate this process as they enable a tax filer to easily examine multiple scenarios and choose the best approach.

Unlike the Dependent Care Credit, this credit can be used by persons that reside in skilled nursing facilities or assisted living residences.

To be eligible for the Elderly and Disabled Tax Credit, individuals must be age 65 or over. If they are under 65, they may be eligible if they are retired on permanent and total disability and receive taxable disability income.
 

There are no health or disability requirements if the filer is 65 years or older. If he or she is under 65, he or she must be retired on permanent and total disability and receive taxable disability income.

 

Both married and single persons are eligible for the Elderly and Disabled Tax Credit. However, the amount of the credit allowed depends on the filing status. See more information under Financial Status Requirements.

There are income limits to be eligible for the Elderly and Disabled Tax Credit. These can be based on your adjusted gross income or the total of your nontaxable social security and other nontaxable pension(s). Your filing status affects the limits as outlined in the table below.

Filing Status	Your adjusted gross income must be less than	OR the total of your nontaxable social security and pension payments must be less than
Single, Head of household, or Qualifying widow(er) with dependent child	$17,500	$5,000
Married filing a joint return and both spouses qualify	$25,000	$7,500
Married filing a joint return and only one spouse qualifies	$20,000	$5,000
Married filing a separate return and you did not live with your spouse at any time during the year	$12,500	$3,750

 

Veteran’s status does not affect the eligibility for the Elderly and Disabled Tax Credit.

 

The taxpayer must be a U.S. citizen or legal resident to take the Elderly and Disabled Tax Credit.

 

The benefit of the Elderly and Disabled Tax Credit is a reduced overall tax for the family which therefore makes available resources to be applied towards the long-term care of a loved one. The Tax Credit for the Elderly and Disabled is applied directly to reduce the tax owed so it is equivalent to having additional disposable income.

 

A tax deduction reduces the taxable income and therefore ultimately the tax liability. Its value to the taxpayer, however, depends on the individual’s tax bracket. A tax credit is applied directly to the tax owed and therefore, as long as there is a tax liability, it is equivalent to a payout.

 

The maximum amount for the Elderly and Disabled Tax Credit is $1,125.

 

The tax savings from the Elderly and Disabled Tax Credit are realized once annually when taxes are filed.

 

There are no restrictions on how families can use money saved on their federal taxes.

There are no costs associated with taking this credit.

In order to claim the credit, you must fill out Schedule R: Elderly and Disabled Tax Credit when you file your federal return. Read the IRS Publication 524: Elderly and Disabled Tax Credit.