While you may hear this credit casually referred to as the Disability Tax Credit, it’s more accurately known as the Tax Credit for the Elderly or Disabled. Helping your clients claim the credit can significantly reduce their tax liability. Here’s what you should know to determine their eligibility, calculate their credit, and claim it on their return.
What is the disability tax credit?
The Disability Tax Credit, formally known as the Credit for the Elderly or Disabled, is a nonrefundable federal tax credit designed to reduce the tax burden for qualifying U.S. citizens and resident aliens who are age 65 or older or retired on permanent and total disability.
To qualify, individuals must also meet income limits that include thresholds based on adjusted gross income (AGI) and nontaxable Social Security or disability benefits. Eligible taxpayers may receive between $3,750 and $7,500 depending on filing status and income.
Who qualifies for the Credit for the Elderly or Disabled?
Qualifying for the Credit for the Elderly or Disabled depends on meeting several IRS‑defined criteria. In general, eligibility is based on factors such as age or permanent and total disability status, filing status, and income thresholds that include adjusted gross income as well as certain nontaxable benefits and pensions.
Age and disability requirements
For the purposes of the Credit for the Elderly and Disabled, a qualified individual must be a U.S. citizen or resident alien, who is age 65 or older at the end of the tax year OR is under age 65 and is permanently and totally disabled. To be considered disabled they must meet all three of the following criteria:
- They retired on permanent and total disability
- They received taxable disability income during the tax year
- They had not reached the mandatory retirement age at the beginning of the tax year (Mandatory retirement age varies and is set by the taxpayer’s former employer. In other words, if they were required to retire because they reached mandatory retirement age, they do not qualify for this credit.)
In some cases, your disabled clients may need to include a “Statement of Permanent and Total Disability” that has been signed by a physician.
Filing status requirements
Generally, if your client is married, they must file a joint return with their spouse to qualify for the credit. Individuals who are filing as Married Filing Separately do not qualify for the credit unless they did not live with their spouse at any time during the year.
Income limits
If your client meets the criteria for a qualified individual listed above, you’ll consider their income next. This credit has two separate income thresholds, one for their Adjusted Gross Income (AGI) and another for certain non-taxable benefits and pensions. For tax year 2025, the thresholds were as follows:
Adjusted Gross Income
- Single, head of household, qualified surviving spouse – $17,500
- Married filing jointly and only one spouse qualified for the credit – $20,000
- Married filing jointly and both spouses qualify for the credit – $25,000
- Married filing separately and lived apart from spouse for the entire tax year – $12,500
Certain non-taxable benefits and pensions
- Single, head of household, qualified surviving spouse – $5,000
- Married filing jointly and only one spouse qualified for the credit – $5,000
- Married filing jointly and both spouses qualify for the credit – $7,500
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- Married filing separately and lived apart from spouse for the entire tax year – $3,750
Your client must fall under both income thresholds to qualify for the credit.
How do you calculate and claim the Disability Tax Credit?
You’ll use Schedule R (Form 1040) to figure and claim the credit. The Disability Tax Credit is unique in that it gives you the option to have the IRS calculate and apply the credit for you. To choose this option, simply check the appropriate box on Schedule R. However, your clients will likely prefer that you calculate the credit so that they know their tax liability as soon as possible.
TaxSlayer Pro makes it simple to calculate this credit. From the main menu of the tax return select “Credits,” then “Credits for the Elderly or the Disabled (Sch R).” After selecting the appropriate filing status, enter the following income amounts, if relevant:
- Taxable disability income
- Nontaxable portion of Social Security and Railroad Retirement benefits
- Nontaxable pensions or other pension, annuity, or disability benefits excluded from income
Your TaxSlayer Pro software will take it from there, calculating and applying the credit and attaching Schedule R automatically.
Are there other tax benefits for the disabled?
Disabled persons may be able to benefit from other tax exemptions, credits, and deductions depending on their specific circumstances. If they’ve made renovations to their home to accommodate their disability, they may be able to deduct the costs as a medical expense.
Married disabled individuals who needed a paid caregiver due to their disability may be able to claim the Child and Dependent Care Tax Credit. It is also important to note that some disabled taxpayers may qualify for the Earned Income Tax Credit (EITC), particularly if they receive certain types of disability retirement benefits that count as earned income or if they file jointly with a working spouse. Eligibility depends on the type of disability payments received and whether those payments meet IRS rules for earned income.
Finally, don’t forget to check your state’s laws as some have property tax exemptions and other benefits for the disabled.
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