TIP: The credit is claimed on Form 1040 with Schedule R, Credit for the Elderly or the Disabled, attached or on Form 1040A using Schedule 3, Credit for the Elderly or the Disabled for Form 1040A Filers. The credit cannot be claimed on Form 1040EZ.

Only a "qualified individual" can claim the credit for the elderly and the permanently and totally disabled. Code Section 22(a). A qualified individual is defined as any individual who either attained the age of 65 before the end of the taxable year or retired on disability before the close of the taxable year and was permanently and totally disabled when she retired. <1>

A taxpayer must be a United States citizen or resident in order to claim the credit. <2> A taxpayer who is married at the close of the taxable year must file a joint return to claim the credit. <3> Married taxpayers who live apart at all times during the taxable year are not required to file a joint return to be eligible to claim the credit. Code Section 22(e)(1).

PERMANENTLY AND TOTALLY DISABLED

A taxpayer under the age of 65 at the close of the year is only a qualified individual for purposes of the credit if he is permanently and totally disabled. A person is permanently and totally disabled if he is unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment that can be expected to result in death, or which has lasted, or can be expected to last, for a continuous period of at least twelve months. An individual will not be considered permanently and totally disabled unless he furnishes such proof of his disability as the Secretary may require. Code Section 22(e)(3).

As proof, a doctor generally must certify that the taxpayer is permanently and totally disabled. <4>

TIP: Beginning in 1998, taxpayers are no longer required to attach the physician's statement to the return. However, the statement must be completed by a physician and kept with the taxpayer's records. Publication 17, Your Federal Income Tax.

The physician's statement is not required if the Veterans Administration (VA) has certified that the taxpayer is permanently and totally disabled, or if the taxpayer filed a statement in an earlier year and due to his disability, the taxpayer was unable to engage in any substantial gainful activity in the current year. IRS Publication 524, Credit for the Elderly or Disabled.

TIP: If the VA certifies that a taxpayer is permanently and totally disabled, he may substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement. VA Form 21-0172 must be signed by a person authorized by the VA to do so. This form may be obtained from a VA regional office.

SUBSTANTIAL GAINFUL ACTIVITY

The definition of permanent and total disability for purposes of the credit requires that the taxpayer be unable to engage in any substantial gainful activity. A taxpayer is engaged in substantial gainful activity if she works, performing significant duties for a reasonable period of time for pay or profit. IRS Publication 524, Credit for the Elderly or Disabled. Regular work in a full-time or part-time competitive work situation for at least the minimum wage conclusively shows that the taxpayer is able to engage in substantial gainful activity. <5>

Substantial gainful activity does not include work that the taxpayer does at home to care for herself. Substantial gainful activity also does not include unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. The fact that the taxpayer has not worked for some time is not, by itself, conclusive evidence that the taxpayer cannot engage in substantial gainful activity.