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Category: Credits

Credit for the Elderly or Disabled - How do I know if I qualify as "permanently and totally disabled"?

To take the Credit for the Elderly or Disabled, by the end of the tax year you must have been (a) age 65 or older, OR (b) permanently and totally disabled. If you were considered permanently and totally disabled, there are 2 other qualifications that must be met for you to be eligible to take the credit (see "I qualify as disabled" below)

What is "permanently and totally disabled"?

To be considered disabled, the person in question must meet BOTH of the following conditions:

 

  1. He or she cannot engage in any substantial gainful activity because of a physical or mental condition.
  2. A doctor must determine that the condition has lasted or can be expected to last continuously for at least a year, or that the condition can lead to death.

Examples 1 and 2 below show situations in which the individuals are considered engaged in a substantial gainful activity. Example 3 shows a person who might not be considered engaged in a substantial gainful activity. In each example, the person was under age 65 at the end of the year.

Example 1. Sue retired on disability as a sales clerk. She now works as a full-time babysitter at the minimum wage. Although she does different work, Sue babysits on ordinary terms for the minimum wage. She cannot take the credit because she is engaged in a substantial gainful activity.

Example 2. Mary, the president of XYZ Corporation, retired on disability because of her terminal illness. On her doctor's advice, she works part time as a manager and is paid more than the minimum wage. Her employer sets her days and hours. Although Mary's illness is terminal and she works part time, the work is done at her employer's convenience. Mary is considered engaged in a substantial gainful activity and cannot take the credit.

Example 3. John, who retired on disability, took a job with a former employer on a trial basis. The purpose of the job was to see if John could do the work. The trial period lasted for some time during which John was paid at a rate equal to the minimum wage. But because of John's disability, he was given only light duties of a nonproductive, make-work nature. Unless the activity is both substantial and gainful, John is not engaged in a substantial gainful activity. The activity was gainful because John was paid at a rate at or above the minimum wage. However, the activity was not substantial because the duties were of a nonproductive, make-work nature. More facts are needed to determine if John is able to engage in a substantial gainful activity.

 

I qualify as disabled. Can I take the credit?

If you qualify as being permanently and totally disabled, you must also meet BOTH of the qualifications below to take the Credit for the Elderly or Disabled.

 

  1. You received taxable disability income during the tax year.
  2. On January 1 of last year, you had not reached the mandatory retirement age. The mandatory retirement age is the age at which your employer's retirement program would have required you to retire.

For more information on who can take the elderly or disable credit click here
For more information on what is considered permanent and total disability click here