Permanent and Total Disability

To be considered permanently and totally disabled, a taxpayer must be unable to engage in any substantial gainful activity because of a medically determined physical or mental impairment that is expected to result in death, or that has lasted or is expected to last for a continuous period of at least 12 months.

Substantial gainful activity means performing significant physical or mental work for pay or profit (or intended for profit). Part-time work may constitute substantial activity. The fact that the work activity may pay less than the one in which the taxpayer was engaged prior to the disability is immaterial.

The following nontaxable income must be taken into account and will reduce the maximum amount on which the credit is computed:

• Nontaxable social security and equivalent tier 1 railroad retirement benefits;
• Nontaxable veterans' pensions; and
• Any other pension, annuity, or disability benefits excluded from gross income (but not the cost recovery portion of a pension or annuity).