Certain qualified locations may offer what is termed “sheltered employment” to physically or mentally disabled persons.  These could include sheltered workshops, hospitals, homebound programs, and homes sponsored by the Department of Veterans Affairs (VA).  Working in sheltered employment may not provide the same level of income as in other types of employment, but it does not necessarily mean you are not capable of engaging in substantial gainful activity.

You will need a physician’s statement certifying that you were totally and permanently disabled on the date you retired.  There is a standard format in the Internal Revenue Service (IRS) instructions for Schedule R (Form 1040) and Schedule 3 of Form 1040A that you can use.  These instructions are available for downloading from the IRS website.  If you are a veteran, you can use VA Form 21-0172, Certification of Permanent and Total Disability, from the Department of Veterans Affairs.

If you are under age 65 and disabled, you can claim the Credit for the Elderly or the Disabled only if you have disability income.  This income must be paid under your employer’s accident or health plan or pension plan, and must be included in your taxable income.  Payments that are made from a plan that does not provide for disability retirement do not qualify as disability income.  And for purposes of this credit, disability income does not include amounts paid when you reach mandatory retirement age.