What Is the 2023 Schedule R and Who Can Claim It?

Schedule R, the Credit for the Elderly or the Disabled, is a component of the federal income tax return designed to provide tax relief. It offers a nonrefundable tax credit to taxpayers who are either of a certain age or have retired because of a permanent and total disability. This credit directly reduces a taxpayer’s overall tax liability, which can be a benefit for those on a limited income.

Eligibility Requirements for Schedule R

To qualify for the Credit for the Elderly or the Disabled, a taxpayer must meet requirements related to age or disability status. The primary path to eligibility is based on age, requiring a taxpayer to be 65 or older by the end of the tax year. A taxpayer under age 65 can also qualify if they retired on permanent and total disability and received taxable disability income during the tax year.

The IRS defines “permanent and total disability” as a condition where an individual cannot engage in any substantial gainful activity due to a physical or mental impairment. This determination must be supported by a physician’s assessment that the condition has lasted or is expected to last continuously for at least 12 months, or that it is expected to result in death.

For those qualifying due to disability, a physician’s statement certifying the permanent and total disability is necessary. While this document is not attached to the tax return, it must be kept with the taxpayer’s personal records in case the IRS requests it for verification.

Filing status also plays a role in determining eligibility. For those who are married and filing jointly, the credit can be claimed if either one or both spouses meet the age or disability qualifications. A restrictive rule applies to those using the Married Filing Separately status; a taxpayer can only claim the credit if they lived apart from their spouse for the entire tax year.

Required Information and Income Limits

Taxpayers must gather specific financial documents and understand the income limitations that can prevent them from qualifying. This includes a copy of the taxpayer’s Form 1040, 1040-SR, or 1040-NR to identify the Adjusted Gross Income (AGI). You will also need Form SSA-1099 for Social Security benefits and Form 1099-R for pension, annuity, or disability income from sources like the Railroad Retirement Board or the Department of Veterans Affairs.

Two distinct income tests determine final eligibility for the credit, and failing either one means the credit cannot be claimed. The first test is based on the taxpayer’s AGI. The second test involves the total amount of certain nontaxable benefits, including Social Security.

For the 2023 tax year, the AGI must be less than:

• $17,500 for Single, Head of Household, or Qualifying Surviving Spouse
• $20,000 for Married Filing Jointly if only one spouse qualifies
• $25,000 for Married Filing Jointly if both spouses qualify
• $12,500 for Married Filing Separately (and lived apart all year)

The total amount of nontaxable benefits must be less than:

• $5,000 for Single, Head of Household, or Qualifying Surviving Spouse
• $5,000 for Married Filing Jointly if only one spouse qualifies
• $7,500 for Married Filing Jointly if both spouses qualify
• $3,750 for Married Filing Separately (and lived apart all year)

Step-by-Step Guide to Completing Schedule R

Once eligibility is confirmed, the taxpayer can proceed with filling out Schedule R. The process begins with Part I, where the taxpayer must check the box that corresponds to their filing status and age.

If the taxpayer is under age 65 and qualifying based on a disability, they must complete Part II, Statement of Permanent and Total Disability. This section requires the taxpayer to confirm they were unable to engage in any substantial gainful activity, referencing the physician’s statement that must be kept for their records.

Part III walks the taxpayer through the credit calculation. The first step, on Line 10, is to determine the initial base amount. This amount is $5,000 for single individuals or for joint filers where only one spouse qualifies, $7,500 for joint filers where both spouses qualify, and $3,750 for a married individual filing separately.

Next, on Line 11, the taxpayer enters the total of any nontaxable Social Security benefits and other nontaxable pension, annuity, or disability income they received. Line 12 involves a reduction for certain taxpayers under age 65 based on their earned income, which includes wages, salaries, and net earnings from self-employment.

A reduction is also based on the taxpayer’s AGI. The calculation on Line 13c reduces the credit base by one-half of the amount by which the AGI exceeds certain thresholds ($7,500 for Single, $10,000 for Married Filing Jointly, and $5,000 for Married Filing Separately).

After summing all reductions and subtracting them from the initial base amount, the result is multiplied by 15% (0.15) on Line 21 to arrive at the tentative credit. The final step is to compare this tentative credit to the taxpayer’s tax liability limit, as the credit cannot exceed the amount of tax owed. The final, allowable credit is then reported on Schedule 3 (Form 1040).