Posted by Dennis Jao

Tax Tips For Older Americans

Tax Tips For Older Americans

Everyone wants to save on taxes, and older Americans are no exception. If you're over 50, here are some tax tips that can help you get there.


The standard deduction for the elderly: If you and/or your spouse are 65 or older and choose not to itemize your deductions, you can take advantage of a higher standard deduction. There is an added improvement in the standard deduction if you or your spouse is blind.


Credit for the disabled or elderly: If you and/or your spouse are 65 or over or under 65 and have a total and permanent disability, you may take the credit for an elderly or disabled person. If you are under 65, you should ask your doctor to complete a declaration stating that you had a permanent and total disability when you retired. You must also have a taxable disability income that meets certain requirements. Credit is based on your age, marital status, and income.

You can only benefit from the credit if you meet the following conditions:

In 2020, the adjusted gross income (AGI) on line 11 of Form 1040 (or Form 1040-SR) must be less than $17,500 ($ 20,000 if you are married, filing together and only one spouse qualifies), $25,000 (if you are married and filing together and both are eligible), or $12,500 (if you are married filing separately and live separately from your spouse throughout the year).

The non-taxable portion of your social security or other non-taxable income from a pension, annuity, or disability is less than $5,000 (single, qualifying widow/er with dependent child, or head of household); $ 5,000 (married filing jointly, and only one spouse is eligible); $7,500 (married filing jointly, and both spouses are eligible); or $ 3,750 (married, filing separately and living apart from your spouse throughout the year).


Retirement Account Limits Increase: After you turn 50, you can contribute (and defer your tax payments) up to $26,000 in 2020 (and 2021). The amount includes an additional contribution of $6,500 (2020 and 2021) for employees over 50 who participate in 401(k), 403(b) plans, most 457 plans, and the thrift savings plan of the federal government.


The penalty for early withdrawal has been abolished: If you withdraw money from an IRA before the age of 59½, you will usually be asked to pay a 10% penalty (there are exceptions); however, after the age of 59½, there is no penalty for early withdrawal. Additionally, if you resign or are terminated from your job at age 55 or older (50 for public safety employees), you can withdraw money from a 401 (k) plan without penalty. However, you will still have to pay additional income taxes.


Higher-income tax filing limit: Taxpayers aged 65 and over are entitled to an additional income of $1,650 ($ 2,600 for married filing jointly) for the 2020 tax year before having to file a tax return. In other words, taxpayers aged 65 and over with an income of $14,050 ($27,400 for married filing jointly) in 2020 or less may not be required to file a tax return.


FOR MORE INFORMATION OR TO SEE HOW DENNIS JAO CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CLICK THE BLUE TAB ON THIS PAGE.


THANKS FOR VISITING.

Dennis Jao
Contact Member