Tax season is here! Are you at your Morristown assisted living community dreading your upcoming tax prep? Of course, everybody wants to seek out ways to save money on their taxes or maximize the return received, and seniors are no exception. If you are over 50 years old, we’ve got a few tips that can potentially help with tax breaks for seniors. We hope you’ll find them interesting and useful.
ONE- A Higher Standard Deduction for Seniors
If you and/or your spouse are age 65 or up, and you do not itemize your deductions, you can partake of a higher deduction amount when filing your taxes. Did you know there is also an additional increase in standard deduction if either of you is blind?
TWO– Tax Credit for the Elderly or Disabled
At age 65 or older, if you are fully or permanently disabled, you might be eligible for the Credit for the Elderly or Disabled– which is based on factors including age, income, and filing status. In order to receive the tax credit, you must meet the following specifications:
Your income on Form 1040, line 38 is less than $17,500 if single, $20,000 if married and filing jointly with one qualifying spouse, or $25,000 if married, filing jointly where both parties qualify.
Your non-taxable Social Security and/or other pensions, disability payments or annuities, total to less than $5,000 (if filing as head of household OR married and filing jointly with one qualifying party), $7,500 if married, filing jointly, with both parties qualifying, or $3,750 if you’re married, filing separately, and lived apart for a full year.
THREE- Increase in Retirement Account Limits
Once you are age 50 or above, you are eligible to contribute up to $24,500 to a retirement account and defer paying tax on those dollars. This is a great way to save while also making fiscal decisions with an inherent tax benefit.
FOUR- Early Withdrawal Sans Penalty
Once you are age 59 1/2 or older, you will not be penalized if you withdraw money from your IRA account. Before reaching that age, you are be required to pay a 10% fee upon withdrawal. Furthermore, if you quit a job or your employment is terminated and you’re age 55 or older, you can also withdraw money from a 401(k) without any fees. That said, you would be expected to pay tax on that additional income.
FIVE- There’s a Higher Filing Threshold for Seniors
Taxpayers ages 65 and older can earn an income of $1,600 more, or $2,600 if married, filing jointly, and both parties are 65 or older, before they need to file a tax return. So what that means is that older taxpayers with an income of $13,600 or less ($26,600 if married and filing jointly), may not even need to file an income tax return at all.
No matter what your personal financial situation is like, we hope you find these tax tips useful. Tax prep for seniors doesn’t have to be an intimidating task, and there are ways to help you get the highest possible benefit when filing your taxes.