If you retired on disability, you must report your disability
income as ordinary income. However, you may be entitled to a credit.
See Credit for Elderly or Disabled, later.
Disability Payments
If you retired on disability, pension payments you receive are
taxable as wages until you reach minimum retirement age.
Beginning on the day after you reach minimum retirement age,
your payments are treated as a pension or annuity. At that time you
begin to recover the cost of the annuity under the rules discussed
earlier.
Minimum retirement age.
Minimum retirement age is the age at which you could first receive
an annuity were you not disabled.
How to report.
You must report all your taxable disability payments on line 7,
Form 1040 or Form 1040A, until you reach minimum retirement age.
Credit for Elderly or Disabled
You can take the credit for the elderly or the disabled if:
- You are a qualified individual, and
- Your income is not more than certain limits.
You are a qualified individual for this credit if you are a U.S.
citizen or resident and, at the end of the tax year, you are:
- Age 65 or older, or
- Under age 65, retired on permanent and total disability,
and:
- Received taxable disability income, and
- Did not reach mandatory retirement age before the tax
year.
If you retired after January 1, 1977, you are retired on permanent
and total disability if:
- You were permanently and totally disabled when you retired,
and
- You retired on disability before the close of the tax
year.
Mandatory retirement age.
Mandatory retirement age is the age set by your employer at which
you must retire.
Permanently and totally disabled.
You are permanently and totally disabled if you cannot engage in
any substantial gainful activity because of your physical
or mental condition. A physician must certify that the condition can
be expected to result in death or that the condition has lasted (or
can be expected to last) continuously at least 12 months.
Substantial gainful activity.
Substantial gainful activity is the performance of significant
duties over a reasonable period of time while working for pay or
profit, or in work generally done for pay or profit.
Physician's statement.
If you are under 65, you must have your physician complete a
statement certifying that you were permanently and totally disabled on
the date you retired. You can use the Physician's Statement
in the instructions for Part II of either Schedule R (Form 1040)
or Schedule 3 (Form 1040A). Keep this statement for your records. You
do not have to file it with your income tax return.
You do not have to get another physician's statement for 2000 if
certain exceptions apply (as described in the instructions for
Schedule R and Schedule 3) and you checked the box on line 2 of Part
II of either Schedule R (Form 1040) or Schedule 3 (Form 1040A).
Figuring the credit.
The IRS can figure the credit for you. See the instructions for
Schedule R (Form 1040) or Schedule 3 (Form 1040A).
More information.
For complete information on this credit, get Publication 524.
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