Cat. No. 12059R

Instructions for

Schedule 3 (Form 1040A)

Credit for the Elderly or the Disabled for Form 1040A Filers

1998 Department of the Treasury

Internal Revenue Service

A Change To Note

Beginning in 1998, if you claim the credit for the

disabled, you do not have to file a physician’s

statement with Form 1040A. However, if you have to

get a statement, you must keep it for your records.

See the instructions for Part II for details.

Purpose of Schedule

Use Schedule 3 to figure the credit for the elderly or

the disabled.

Additional Information

See Pub. 524 for more details about the credit.

Who Can Take the Credit

The credit is based on your filing status, age, and

income. If you are married filing a joint return, it is also

based on your spouse’s age and income. You may be

able to take this credit if either of the following

applies.

● You were age 65 or older at the end of 1998, OR

● You were under age 65 at the end of 1998 and you

meet all three of the following.

1. You were permanently and totally disabled on

the date you retired. If you retired before 1977, you

must have been permanently and totally disabled on

January 1, 1976, or January 1, 1977.

2. You received taxable disability income for 1998.

3. On January 1, 1998, you had not reached

mandatory retirement age (the age when your

employer’s retirement program would have required

you to retire).

For the definition of permanent and total disability,

see What Is Permanent and Total Disability? on

page 2. Also, see the instructions for Part II.

Married Persons Filing Separate Returns

If your filing status is married filing separately and you

lived with your spouse at any time during 1998, you

cannot take the credit.

Income Limits

See the chart below.

Income Limits for Credit for the Elderly or the Disabled

IF you are . . .

Single, Head of household, or

Qualifying widow(er)

Married filing a joint return and

only one spouse is eligible for

the credit

Married filing a joint return and

both spouses are eligible for the

credit

Married filing a separate return

and you lived apart from your

spouse for all of 1998

The amount on

Form 1040A, line 19, is . . .

$17,500 or more

$20,000 or more

$25,000 or more

$12,500 or more

THEN you generally cannot take the credit if:

Or you received . . .

$5,000 or more of nontaxable

social security or other nontaxable

pensions

$5,000 or more of nontaxable

social security or other nontaxable

pensions

$7,500 or more of nontaxable

social security or other nontaxable

pensions

$3,750 or more of nontaxable

social security or other nontaxable

pensions
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Want the IRS To Figure Your Credit?

If you can take the credit and you want us to figure it

for you, check the box in Part I of Schedule 3 for your

filing status and age. Fill in Part II and lines 11 and 13

of Part III if they apply to you. Then, enter “CFE” next

to line 27 on Form 1040A and attach Schedule 3 to

your return.

What Is Permanent and Total Disability?

If you were under age 65 at the end of 1998, you must

be permanently and totally disabled to take the credit.

A person is permanently and totally disabled if

both 1 and 2 below apply.

1. He or she cannot engage in any substantial

gainful activity because of a physical or mental

condition, and

2. A physician determines that the condition has

lasted or can be expected to last continuously for at

least a year or can lead to death.

Examples 1 and 2 below show situations in which

the individuals are considered engaged in a substantial

gainful activity. Example 3 shows a person who might

not be considered engaged in a substantial gainful

activity. In each example, the person was under age

65 at the end of the year.

Example 1. Sue retired on disability as a sales clerk.

She now works as a full-time babysitter at the

minimum wage. Although she does different work, Sue

babysits on ordinary terms for the minimum wage. She

cannot take the credit because she is engaged in a

substantial gainful activity.

Example 2. Mary, the president of XYZ Corporation,

retired on disability because of her terminal illness. On

her doctor’s advice, she works part time as a manager

and is paid more than the minimum wage. Her

employer sets her days and hours. Although Mary’s

illness is terminal and she works part time, the work is

done at her employer’s convenience. Mary is

considered engaged in a substantial gainful activity

and cannot take the credit.

Example 3. John, who retired on disability, took a job

with a former employer on a trial basis. The purpose of

the job was to see if John could do the work. The trial

period lasted for some time during which John was

paid at a rate equal to the minimum wage. But

because of John’s disability, he was given only light

duties of a nonproductive, make-work nature. Unless

the activity is both substantial and gainful, John is not

engaged in a substantial gainful activity. The activity

was gainful because John was paid at a rate at or

above the minimum wage. However, the activity was

not substantial because the duties were of a

nonproductive, make-work nature. More facts are

needed to determine if John is able to engage in a

substantial gainful activity.

Disability Income

Generally, disability income is the total amount you

were paid under your employer’s accident and health

plan or pension plan that is included in your income as

wages or payments instead of wages for the time you

were absent from work because of permanent and

total disability. However, any payment you received

from a plan that does not provide for disability

retirement is not disability income.

In figuring the credit, disability income does not

include any amount you received from your employer’s

pension plan after you have reached mandatory

retirement age.

For more details on disability income, see Pub. 525.

Part II

Statement of Permanent and Total

Disability

If you checked box 2, 4, 5, 6, or 9 in Part I and you

did not file a physician’s statement for 1983 or an

earlier year, or you filed a statement for tax years after

1983 and your physician signed on line A of the

statement, you must have your physician complete a

statement certifying that:

● You were permanently and totally disabled on the

date you retired, or

● If you retired before 1977, you were permanently and

totally disabled on January 1, 1976, or January 1,

1977.

Beginning in 1998, you do not have to file this

statement with your Form 1040A. But you must keep

it for your records. You may use the physician’s

statement on page 4 for this purpose. Your physician

should show on the statement if the disability has

lasted or can be expected to last continuously for at

least a year, or if there is no reasonable probability that

the disabled condition will ever improve. If you file a

joint return and you checked box 5 in Part I, you and

your spouse must each get a statement.

If you filed a physician’s statement for 1983 or an

earlier year, or you filed a statement for tax years after

1983 and your physician signed on line B of the

statement, you do not have to get another statement

for 1998. But you must check the box on line 2 in

Part II to certify all three of the following:

1. You filed a physician’s statement in an earlier

year.

2. You were permanently and totally disabled during

1998.

3. You were unable to engage in any substantial

gainful activity during 1998 because of your physical or

mental condition.

If you checked box 4, 5, or 6 in Part I, enter in the

space above the box on line 2 in Part II the first

name(s) of the spouse(s) for whom the box is checked.

If the Department of Veterans Affairs (VA) certifies

that you are permanently and totally disabled, you can

use VA Form 21-0172 instead of the physician’s

statement. VA Form 21-0172 must be signed by a

person authorized by the VA to do so. You can get this

form from your local VA regional office.
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Part III

Figure Your Credit

Line 11

If you checked box 2, 4, 5, 6, or 9 in Part I, use the

following chart to complete line 11.

IF you checked . . .

The total of $5,000 plus the

disability income you reported

on Form 1040A for the spouse

who was under age 65.

The total amount of disability

income you reported on Form

1040A.

The total amount of disability

income you reported on Form

1040A for both you and your

spouse.

Box 6

Box 2, 4, or 9

Box 5

THEN enter on line 11 . . .

Example 1. Bill, age 63, retired on permanent and total

disability in 1998. He received $4,000 of taxable

disability income that he reported on Form 1040A, line

7. He filed a joint return with his wife who was age 67

in 1998. On line 11, Bill enters $9,000 ($5,000 plus the

$4,000 of disability income he reported on Form

1040A).

Example 2. John checked box 2 in Part I and enters

$5,000 on line 10. He received $3,000 of taxable

disability income, which he enters on line 11. John also

enters $3,000 on line 12 (the smaller of line 10 or line

11). The largest amount he can use to figure the credit

is $3,000.

Lines 13a Through 18

The amount on which you figure your credit may be

reduced if you received certain types of nontaxable

pensions and annuities. The amount may also be

reduced if your adjusted gross income is over a certain

amount, depending on which box you checked in 

Part I.

Line 13a. Enter any social security benefits (before

deduction of Medicare premiums) you (and your

spouse if filing a joint return) received for 1998 that are

not taxable. Also, enter any tier 1 railroad retirement

benefits treated as social security that are not taxable.

If any of your social security or equivalent railroad

retirement benefits are taxable, the amount to enter on

this line is generally the difference between the

amounts entered on Form 1040A, line 13a and line

13b.

Note: If your social security or equivalent railroad

retirement benefits are reduced because of workers’

compensation benefits, treat the workers’

compensation benefits as social security benefits when

completing Schedule 3, line 13a.

Line 13b. Enter the total of the following types of

income that you (and your spouse if filing a joint return)

received for 1998.

● Veterans’ pensions (but not military disability

pensions).

● Any other pension, annuity, or disability benefit that

is excluded from income under any provision of

Federal law other than the Internal Revenue Code. Do

not include amounts that are treated as a return of

your cost of a pension or annuity.

Do not include on line 13b any pension, annuity, or

similar allowance for personal injuries or sickness

resulting from active service in the armed forces of any

country, or in the National Oceanic and Atmospheric

Administration or the Public Health Service. Also, do

not include a disability annuity payable under section

808 of the Foreign Service Act of 1980.
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Instructions for Physician’s Statement

Taxpayer

If you retired after 1976, enter the date you retired in

the space provided on the statement below.

was permanently and totally disabled on January 1, 1976, or January 1, 1977, OR was permanently and totally

disabled on the date he or she retired. If retired after 1976, enter the date retired. ©

Physician: Sign your name on either line A or B below.

Physician’s Statement (keep for your records)

I certify that

Physician

A person is permanently and totally disabled if both of

the following apply:

1. He or she cannot engage in any substantial gainful

activity because of a physical or mental condition, and

2. A physician determines that the disability has

lasted or can be expected to last continuously for at

least a year or can lead to death.

A The disability has lasted or can be expected to last

continuously for at least a year

B There is no reasonable probability that the disabled

condition will ever improve

Name of disabled person

Physician’s signature Date

Physician’s signature Date

Physician’s name Physician’s address