Tax season is upon us. Maybe you are in your Huntsville assisted living community thinking about– or dreading– the tax prep that awaits you. Naturally everyone wants to find 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 have a few potential tips that can help with tax breaks for seniors. We hope you’ll find them interesting and helpful.
1) Higher Standard Deduction for Seniors
If you and/or your spouse are 65 or older, and you don’t itemize your tax deductions, you can take advantage of a higher deduction amount when you file your taxes. There is also an additional increase in standard deduction if either of you is blind.
2) Increase in Retirement Account Limits
Once you are 50 years old or older, 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.
3) Tax Credit for the Elderly or Disabled
At ages 65 and up, if you are totally or permanently disabled, you may be eligible for the Credit for the Elderly or Disabled, which is based on age, income, and filing status. In order to get the credit, you must meet the following requirements:
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 with both parties qualifying.
AND
Your non-taxable Social Security or other pensions, annuities, or disability payments are 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, and both parties qualify, or $3,750 if you’re married, filing separately, and lived apart for a full year.
4) No Early Withdrawal Penalties
Once you reach the age of 59 1/2 you will not be penalized if you withdraw money from your IRA account. Prior to that age, you would be required to pay a 10% fee. Moreover, if you leave a job or your employment is terminated and you’re 55 or older, you may also withdraw money from a 401(k) without any penalties. That said, you would have to pay tax on that additional income.
5) 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 situation, we hope you find these tips helpful! Tax prep for seniors doesn’t have to be a daunting endeavor, and there are ways to ensure you get the highest possible benefit when filing your tax return.