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Retirement Planning

How to take advantage of the tax credit for the elderly or disabled in retirement

Did you know that people over 65 - or under 65 on permanent full disability - may be eligible for a special tax credit? If this is applicable to you, get educated here.
Taxes are an integral part of retirement income planning. After all, you want to be smart about how much of your income may be taxed in retirement so that you can better plan for the years ahead as you start saving for retirement.

Credit for the Elderly or Disabled

Another good reason for incorporating a solid tax strategy in your retirement planning efforts would be to stay informed about the many different IRS tax laws and credits. This is important not only because tax laws and credits may change from year to year, but they can be different as you become older and once you enter into retirement. One of these is retirement credits is the Credit for the Elderly or Disabled.

The Credit for the Elderly is just that - a credit that may be applied to your income that may help reduce the amount of income tax you owe to the IRS. According to the IRS, you may be able to qualify for this credit if you are a U.S. citizen or resident alien and either of the following applies:

  • You were age 65 or older at the end of the previous year or
  • You are under age 65 and retired, and meet all of the following criteria:
  • You retired on permanent and total disability.
  • You received taxable disability income for the previous year.
  • On January 1, 2017, you had not reached mandatory retirement age.

Typically, if you're married at the end of the tax year, you and your spouse must file a joint return in order to take advantage of the credit. However, if you and your spouse did not live in the same household at any time during the tax year, you may be able to file either a joint return or separate returns and still remain eligible.

The Credit for the Elderly or Disabled is meant to help reduce the taxes for low-income retired and disabled retired individuals. For this reason, there are eligibility limits that are based on your adjusted gross income (AGI), or the total of your nontaxable Social Security and other nontaxable assets.

To learn more about the Credit for the Elderly or the Disabled, including circumstances that make you ineligible to claim, visit the IRS publication number 524.



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