Elderly income earners in the U.S. face different tax rules than younger taxpayers. The Internal Revenue Service (IRS) grants elderly tax filers a special tax credit called the Credit for the Elderly or Disabled. Tax credits directly reduce the amount of income tax you owe. Eligibility for the credit depends on a variety of factors such as age, filing status and income.
A taxpayer must be a "qualifying individual" to be eligible for the Credit for the Elderly or Disabled. According to the IRS, you are a qualifying individual for 2010 tax returns if you were at least age 65 by the end of 2010 or you are retired on permanent disability. If you are married, you must file a joint return with your spouse to be eligible for the credit unless you did not live with your spouse at any time during the tax year or you were the head of a household.
The Credit for the Elderly or Disabled is designed to ease the burden of taxes on low-income individuals. Therefore if your income exceeds certain minimum levels, you are not eligible for the credit. The IRS states that single tax fliers with an adjusted gross income (AGI) of $17,500 or more, married couples where both partners are qualifying individuals with a combined AGI of $25,000 or more and separate filers with AGI of $12,500 or more do not qualify for the credit (as of 2010). In addition, if you receive nontaxable Social Security or pension benefits equal to $5,000 or more ($7,500 for joint filers where both partners are qualifying individuals) you are not eligible for the credit.
Calculating the Credit
The amount of the tax credit depends on your income level, tax filing status and nontaxable Social Security and pension income. The IRS states that taxpayers must use Schedule R (Form 1040 or 1040A) to calculate the amount of credit and provides detailed instructions for making the required calculations. The amount of the credit for single filers is 15 percent of $5,000 minus certain subtractions based on you income level (15 percent of $7,500 minus subtractions for joint filers where both individuals qualify).
According to the IRS, you must file your taxes using Form 1040 or Form 1040A to apply for the Credit for the Elderly or Disabled. In other words, you cannot use Form 1040 EZ, a common form used by individuals with simple tax returns.
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.