We all want to reduce what we send to Uncle Sam. For seniors age 65 and above, we discuss essential tax tips that can help them err on the side of caution:
Seniors and Standard Deductions
As long as both you or your spouse are above 65 years and you didn’t go through the itemizing route, there is a higher standard deduction you can take advantage of and it so happens that if any of the parties are blind, the value increases.
Credit for Disabled or Elderly
For couples above age 65, or one of them is, or below age 65 years and have a permanent and total disability, they might qualify for the Credit for Disabled or Elderly. This credit is a value of age, income, and filing status. Also, one needs to file using Form 1040 or 1040A to get the credit. Form 1040EZ does not qualify for the credit.
Dental and Medical Expenses Deduction
The amount of medical expenses that taxpayers need to exceed before they claim deductions for medical expenses must be 10% of the adjusted gross income (AGI).
For tax years ranging from 2013 to 2016, the AGI threshold is 7.5% of the AGI if either (or both) of the spouse is 65 years. One needs to itemize deductions on the federal tax return to qualify for making medical and dental expenses on the federal tax return. One cannot claim such expenses by taking the standard deduction. Also, you can only include the expenses you paid in the year. The day the check was delivered or mail is what one will claim as the payment; for payment made by check.
An Increase of Retirement account Limit
On getting to age 50, one can contribute as much as $26,000, with the deferment of tax payment. This amount also includes an additional "catch-up" fee for employees aged 50 with participation in 403(b), 401(k), and 457 plans, including a Thrift Savings Plan from the Federal government.
No penalty for Early Withdrawal
There is a 10% penalty for early withdrawal from an IRA account before a certain age – 59½. On getting to this age (59½), there is no penalty for such early withdrawal.
Also, people who left or were sacked at age 55 or above can withdraw from their 401(k) without penalty. One, however, needs to pay taxes on such funds.
Benefits from Social Security
As early as age 62, Americans can sign up to receive their social security benefits. However, waiting till either age 66 or 67 (depending on the retirement age) can allow the monthly service to reach the full potential. Social security might be taxable for some older Americans. The benefit amount is a factor of the benefit alongside other income.
As long as you have a lot of income coming in, the higher the probability of being charged a higher tax. As a result, in preparing your return, one needs extra care when estimating the taxable amount of social security.
The filing threshold for Higher Income tax
For taxpayers aged 65 and above, there is an extra income value they need to get to before they can file an income tax return. The implication is that if their income is within a specific limit, they might need not file, let alone pay income tax.
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THANKS FOR VISITING.
Tiffany Gaskin