Tax deductions Seniors Shouldn’t Miss

A lot of people said that there is always wisdom with age. But there are also perks that can possibly cut your taxes in your retirement when you age. 

The IRS starts to lighten up a bit once you will reach your golden years of 50. The IRS has a few more small presents for you when you hit 65 — but that’s if you know where to look. If you want to have lower taxes in retirement to enjoy more, below are five tax deductions and credits you should never miss.

1. The standard deduction is higher

You will be able to successfully deduct the amounts from the data below if you will take the standard deduction instead of itemizing. But, for those who are over 65 or blind, the standard deduction is $1,300 higher. And, if you are unmarried and not a surviving spouse, it is $1,650 higher. 

2. There will be more shelter income

The IRS limits how much you can contribute each because the contributions to a 401(k) are tax-advantaged. That limit is $19,000 for people under 50 while if you are over that certain age, the limit is $25,000 per year. 

But, that is assuming that you are still working and your humble employer is offering you a 401(k) plan. 

You may still have the chance to contribute an extra $1,000 a year to a traditional IRA or Roth IRA if you already retired and bid your cubicle farewell. That was made possible for people 50 and older by the IRS’ catch-up provision. And remember that until the year you reach 70 ½, you can put money into a traditional IRA while on Rith IRA contribution there’s no age limit. 

3. Medical expenses deduction

The amount that exceeds 10% of your adjusted gross income that is for your medical expenses may be reimbursed if you itemize. For example, if you rang up $10,000 in unreimbursed medical bills and your adjusted gross income is $40,000 and the threshold is $4,000, then your taxes in retirement might be able to be deducted by $6,000. 

You may also be able to add in $420 to $5,270 of the premiums if you have recently purchased long term insurance— but that depends on your age (you can deduct more the more you are older). 

4. A safety net

Regardless of anyone’s age, this tax deduction is available. But, to anyone who would like to downsize in retirement and would like to sell his/her house, this tax deduction is especially useful. You are given an exclusion of up to $250,000 on the sale of your house’s capital gains, according to the IRS— but that applies to single taxpayers only. If you are married, the exclusion rises to $500,000. 

So, let’s say, you will sell your four-bedroom ranch house today for $350,000 and you bought it for $100,000 in 1984, the IRS won’t likely gain anything from you at all. But there are some conditions though:

• Your primary residence should be that house. 
• For at least two years, you must have owned it. 
• Before the date of the sale, you have to have lived in your house for two of the five years although it does not have to be consecutively. But, this condition can be a pass by people in the military, disabled people, Foreign Service or the intelligence community, for details see IRS Publication 523. 
• In the past two years, you haven’t excluded a capital gain from a home sale. 
• In the past five years, you did not buy the house through a like-kind exchange (this is also known as 1031 exchange which is basically a swapping of one investment property for another). 
• Expatriate tax is not possible for you. 

5. If you are disabled, you will get more help

Depending on your filing status, you may qualify for a $3,750 to $7,500 tax credit if you or your spouse retired on permanent or total disability. You may check IRS Publication 524 for more details. 

You can always consult a tax professional if you are hesitant and unsure of some information.