This part of the publication is for federal employees and retirees who receive disability benefits under the CSRS, the FERS, or other federal programs. It also explains the tax credit available to certain taxpayers because of age or disability.taxmap/pubs/p721-002.htm#en_us_publink100028981
If you retired on disability, the disability annuity you receive from the CSRS or FERS is 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 retirement annuity and you can begin to recover the cost of your annuity under the rules discussed in Part II.
If you find that you could have started your recovery in an earlier year for which you have already filed a return, you can still start your recovery of contributions in that earlier year. To do so, file an amended return for that year and each succeeding year for which you have already filed a return. Generally, an amended return for any year must be filed within 3 years after the due date for filing your original return for that year. taxmap/pubs/p721-002.htm#en_us_publink100028982
This is the age at which you first could receive an annuity were you not disabled. This generally is based on your age and length of service.taxmap/pubs/p721-002.htm#en_us_publink100028983
In most cases, under the CSRS, the minimum combinations of age and service for retirement are:
- Age 55 with 30 years of service,
- Age 60 with 20 years of service,
- Age 62 with 5 years of service, or
- For service as a law enforcement officer, firefighter, nuclear materials courier, or air traffic controller, age 50 with 20 years of covered service.
In most cases, the minimum age for retirement under the FERS is between ages 55 and 57 with at least 10 years of service. With at least 5 years of service, your minimum retirement age is age 62. Your minimum retirement age with at least 10 years of service is shown in Table 2.
Table 2. FERS Minimum Retirement Age (MRA) With 10 Years of Service
|IF you were born in||THEN Your MRA is|
|1947 or earlier||55 years.|
|1948||55 years, 2 months.|
|1949||55 years, 4 months.|
|1950||55 years, 6 months.|
|1951||55 years, 8 months.|
|1952||55 years, 10 months.|
|1953 to 1964||56 years.|
|1965||56 years, 2 months.|
|1966||56 years, 4 months.|
|1967||56 years, 6 months.|
|1968||56 years, 8 months.|
|1969||56 years, 10 months.|
|1970 or later||57 years.|
For service as a law enforcement officer, member of the Capitol or Supreme Court Police, firefighter, nuclear materials courier, or air traffic controller, the minimum retirement age is age 50 with 20 years of covered service or any age with 25 years of covered service.taxmap/pubs/p721-002.htm#en_us_publink100028985
You must report all your disability annuity payments received before minimum retirement age on Form 1040 or Form 1040A, line 7, or Form 1040NR, line 8. Disability annuity payments received after you reach that age are reported as discussed under How To Report Benefits, earlier in Part II.taxmap/pubs/p721-002.htm#en_us_publink100028986
For income tax withholding purposes, a disability annuity is treated the same as a nondisability annuity. This treatment also applies to disability payments received before minimum retirement age even though these payments are shown as wages on your return. See Tax Withholding and Estimated Tax in Part I. taxmap/pubs/p721-002.htm#en_us_publink100028987
The tax treatment of certain other benefits is explained in this section.taxmap/pubs/p721-002.htm#en_us_publink100028988
FECA payments you receive for personal injuries or sickness resulting from the performance of your duties are like workers' compensation. They are tax exempt and are not treated as disability income or annuities. However, payments you receive while your claim is being processed, including pay while on sick leave and continuation of pay for up to 45 days, are taxable. taxmap/pubs/p721-002.htm#en_us_publink100028989
If you repay sick leave or disability annuity payments you received and included in income in an earlier year to be eligible for nontaxable FECA benefits for that period, you can deduct the amount you repay. You can claim the deduction whether you repay the amount yourself or have the FECA payment sent directly to your employing agency or the OPM.
Claim the deduction on Schedule A (Form 1040) as a miscellaneous itemized deduction, subject to the 2%- of-adjusted-gross-income limit. It is considered a business loss and may create a net operating loss if your deductions for the year are more than your income for the year. Get Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts, for more information. The repayment is not eligible for the special tax credit that applies to repayments over $3,000 of amounts received under a claim of right.
If you repay sick leave or disability annuity payments in the same year you receive them, the repayment reduces your taxable sick leave pay or disability annuity. Do not deduct it separately.taxmap/pubs/p721-002.htm#en_us_publink100028990
Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks.taxmap/pubs/p721-002.htm#en_us_publink100028991
Disability payments for injuries incurred as a direct result of a military action involving the Armed Forces of the United States and resulting from actual or threatened violence or aggression against the United States or any of its allies, are not included in income.taxmap/pubs/p721-002.htm#en_us_publink100028992
If you received tax-exempt benefits from the Department of Veterans Affairs for personal injuries resulting from active service in the U.S. Armed Forces and later receive a CSRS or FERS disability annuity for disability arising from the same injuries, you cannot treat the disability annuity payments as tax-exempt income. They are subject to the rules described earlier under Disability Annuity. taxmap/pubs/p721-002.htm#en_us_publink100028993
If you retire on disability, any payment for your unused annual leave is taxed as wages in the tax year you receive the payment. taxmap/pubs/p721-002.htm#en_us_publink100028994
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 alien 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 (defined later) before the tax year.
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.
Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability.taxmap/pubs/p721-002.htm#en_us_publink100028995
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 has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. See Physician's statement, next. 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. taxmap/pubs/p721-002.htm#en_us_publink100028996
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 must keep this statement for your tax records. For this purpose, you can use the Physician's Statement in the instructions for either Schedule R (Form 1040) or Schedule 3 (Form 1040A). taxmap/pubs/p721-002.htm#en_us_publink100028997
This is the age set by your employer at which you would have had to retire if you had not become disabled. There is no mandatory retirement age for most federal employees. However, there is a mandatory retirement age for the following federal employees.
- An air traffic controller appointed after May 15, 1972, by the Department of Transportation or the Department of Defense generally must retire by the last day of the month in which he or she reaches age 56.
- A federal firefighter, law enforcement officer, nuclear materials courier, or member of the Capitol or Supreme Court Police who is otherwise eligible for immediate retirement generally must retire by the last day of the month in which he or she reaches age 57 or, if later, completes 20 years of service.
If you figure the credit yourself, fill out the front of Schedule R (if you are filing Form 1040) or Schedule 3 (if you are filing Form 1040A). Next, fill out Part III of the schedule.
If you want the Internal Revenue Service to figure your tax and credits, including the credit for the elderly or the disabled, see Publication 967, The IRS Will Figure Your Tax, and the instructions for Schedule R (Form 1040) or Schedule 3 (Form 1040A). taxmap/pubs/p721-002.htm#en_us_publink100028999
For detailed information about this credit, get Publication 524, Credit for the Elderly or the Disabled.