If you've been unable to work due to a physical or mental health condition, then you may qualify for a tax credit. According to IRS Publication 524, a person under the age of 65 qualifies as having a permanent and total disability if:
- Substantial and gainful activity - They can't engage in any substantial gainful activity because of their physical or mental condition. In other words, they can't work full-time or part-time earning at least the minimum wage.
- Physician's statement - A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. They don't have to file this statement with their return, but you must keep it for their records.
For example, let's say you were working full-time but retired on disability. You now took a part-time job with a local retailer earning at least minimum wage. Unfortunately, you can't take the credit because then you'd be engaged in a substantial gainful activity.
Credit for the Elderly or the Disabled
If you qualify as having a permanent and total disability, then you may be eligible to take the Credit for the Elderly or the Disabled assuming the following:
- You were permanently and totally disabled on the date you retired
- You received taxable disability income for 2022
- On January 1, 2022, you hadn't reached the mandatory retirement age (the age when your employer's retirement program would have required you to retire)
Also, your AGI (adjusted gross income) did not exceed:
- Single filers - $17,500 plus a maximum of $5,000 in social security and pension benefits
- Joint filers - $20,000 plus a maximum of $5,000 in social security and pension benefits
How to Claim the Disability Credit
Use Schedule R (Form 1040) to calculate the credit amount for the elderly or the disabled. You can also elect to have the IRS calculate the credit for you by checking the appropriate box on Schedule R and leaving all other lines about the credit blank.