Tips are good. They can save you money or give you valuable insight into how something works, but only if they’re accurate and up-to-date! For older adults staying on their own or in senior living communities, these tips about taxes are crucial to understanding how to get the most out of your government benefits while still taking advantage of tax deductions that don’t take into account your age or medical expenses. You can also use these tax tips for older adults to find ways to save money and prevent tax fraud when filing your taxes. If you are facing some difficulties to file your taxes yourself due to health conditions, it is always advisable to get help from an accountant.
Standard Deduction for Seniors
A higher standard deduction may make tax filing easier for aging family members with limited incomes. The elderly can claim a higher standard deduction if they or their spouse are age 65 or older at year-end or if they are visually impaired. The additional standard deduction amount depends on whether you’re single or married and whether your spouse also files a return. The amounts are based on your filing status, age, and whether you’re visually impaired. People who qualify for both may claim either one, but not both.
Credit for the Elderly or Disabled
If you are 65 or older or your spouse is 65 or older, you may be able to take an additional tax credit on your income tax return. The amount of your credit depends on your adjusted gross income and whether you file jointly with your spouse. You can claim a limited amount of disability income on line 7 of Schedule R if either one of you qualifies for Social Security Disability Insurance (SSDI) benefits under Title II of the Social Security Act because of mental or physical impairment that prevents substantial gainful activity.
Retirement Account Limits Increase
If you’re an employee at a company with a 401(k), take advantage of any matching program: Many employers match their employees’ contributions up to a certain percentage of their salary and allow them to contribute pre-tax dollars so it lowers your taxable income during your paycheck phase. Both aspects lower your tax bill today.
Early Withdrawal Penalty Eliminated
In an effort to make it easier for older Americans to plan for retirement, Congress has made sweeping changes to one of our nation’s most important savings incentives. In short, early withdrawals from retirement accounts may soon be tax-free as long as they meet certain conditions. To learn more about these changes and how they could benefit you – visit irs.gov and search retirement savers tax credit or call 800-829-1040 before year-end and consult a tax advisor to help you take advantage of these historic new rules and keep more money in your pocket!
Social Security Benefits
Your retirement income can be taxed. If you or your spouse receives more than $25,000 in net Social Security benefits (including tier 1 railroad retirement benefits), at least some of those benefits may be taxable. Any taxable benefits are taxed using a formula that includes only 85% of your Social Security and tier 1 railroad retirement benefit plus tax-exempt interest from the U.S.
Higher Income Tax Filing Threshold
You don’t have to pay taxes on social security benefits if you’re over a certain age and earn over $32,000 in your golden years. The threshold changes from year to year, so check with a tax professional as needed.
