The Credit That Could Reduce Your Income Tax
There is a tax credit available to adults over the age of 65 that can reduce their federal income tax obligations, but many don’t know about it. The Credit for the Elderly and the Disabled is available to seniors who meet a set of criteria, including age, disability status and income.
Taxpayers should utilize Schedule R, the form that can be used to determine if they are owed the Credit for the Elderly and the Disabled along with how the credit will affect their federal taxes. Keep reading to learn more about the benefits of utilizing Schedule R.
Benefits of Utilizing Schedule R
For seniors living on disability and social security, paying income tax can be a financial burden. The benefit of utilizing the Schedule R form is that it determines who cannot afford their federal income tax bill.
Schedule R will also calculate how much of a credit a taxpayer will receive based on their taxable income, nontaxable income and filing status. It’s a nonrefundable credit, however, meaning if the credit owed exceeds the taxpayer’s owed federal income tax, they will not receive the difference as a refund.
Who Should Fill Out a Schedule R Form?
A specific group of taxpayers qualifies for a reduction in their owed federal income taxes through the Credit for the Elderly and Disabled. This tax credit is reserved for United States citizens and resident aliens who are either elderly or disabled. Taxpayers over the age of 65 by the end of the tax year qualify as elderly.
For individuals who are disabled, there are three qualifications that must be met:
- They must be receiving taxable disability payments
- They must be permanently disabled before retirement
- At the end of the tax year, they must not be older than their employer’s maximum retirement age
There are also two different income limits that apply to the Credit for the Elderly and Disabled. Both taxable and qualified nontaxable income is considered. Limits to income are determined based on the taxpayers filing status.
Calculating Your Schedule R Credit
The total Credit for Elderly and Disabled received is calculated based on filing status and income. Both taxable and nontaxable income, like social security, workers compensation and pensions, are taken into consideration.
Remember, this is a tax credit, not a deduction. It doesn’t reduce taxable income. Instead, it reduces the amount owed, sometimes to nothing at all. Even if you don’t qualify after filling out Schedule R, it certainly can’t hurt and may give you an idea of how to plan for next year’s tax bill.
~Here’s to Your Financial Health!