Now that you are finally retired and the kids have left the nest, you are unable to claim some of the deductions and tax credits you once were able to. But, do not let that discourage you because there are a number of tax deductions and breaks you can still get as a senior.
Below, we will go over some of the deductions you may qualify for and also some things you should keep in mind when you do prepare to do your taxes. Remember, you can always work alongside of a tax agent to ensure your tax preparation goes as smoothly as you would like.
1. Not All SSI and SSD Benefits Are Taxed
One of the perks of being over 65 is that not all of your social security benefits will be taxed. The amount that you will pay taxes on will depend on your filing status and your other income.
For example, if your income falls between $25,000 and $34,000 per year and you file as single status, half of your social security benefits may be taxable.
For married couples, if your income falls between $32,000 and $44,000 per year, about half of your income may be taxable.
If your income is lower than the threshold set by the IRS, then you do not have a taxable amount.
2. The Medical Expense Threshold is Lower
For seniors 65 and older, the medical expense threshold is lowered to seven and a half percent of your adjusted gross income as opposed to ten percent.
Seniors can claim medical expenses not covered by their insurance including medical bills, hospital bills, dental bills, prescription costs, and similar.
It is important to work with a tax professional if you do have a lot of medical expenses that you plan to deduct. You will need to keep record of the bills and have receipts on hand to show the amount you paid and the amount covered by the insurance company.
3. Low-Income Households
If you are considered a low-income household and you are 65 or older, there are tax credits available to you if you qualify for them. These tax credits are usually available to those seniors who meet the poverty guidelines. If you receive social security benefits, it is not likely that you will qualify for the low income credit, so it is important that you speak with a tax agent to help you better understand what you can and cannot claim.
4. IRA Withdrawals
If you have an IRA, after a certain age you are usually required to take out a required amount each year. The biggest problem that many seniors have with this is that they are then required to pay taxes on the amount that was withdrawn.
If you do not need the income and you roll the distribution over directly to a charity, you will not have to pay taxes on the amount that you rolled over. This is beneficial to seniors who donate a portion of their income to charity.
5. Itemize or Take a Standard Deduction
When it comes time to file your taxes, you need to make sure that you are claiming the right deduction. Even though you are 65, you still have the option to choose the standard deduction or to itemize your taxes.
It is important that you sit down and think about your options. You should work with a professional or use a tax accounting software to determine which option is best for you. Just because you think the standard deduction is the best, does not mean that it actually is and you may be paying more than you should.
The standard deduction for seniors who are 65 and older is higher than for those who are younger than 65. For instance, if you are 65 or older and file as single, your standard deduction is $7,750 as opposed to $6,200 for someone who is single and under 65.
No matter how old you are, you need to file your taxes. Since you have reached the 65 and older milestone, you will find that you are eligible to receive more tax credits and deductions, should you qualify for them.
Filing your taxes can be difficult and if you do not understand how to do them, seek help from a professional tax agent. Many tax offices offer special discounts to seniors as well.
