5 Tips for Filing Your Taxes
Tax season is here, friends! Maybe you’re in your Birmingham assisted living community dreading your impending tax prep? We know everyone wants to find ways to save money on their taxes, and seniors are no exception to this. So if you are over 50 years old, we have a few tips that just might help with tax breaks for seniors. We hope you’ll find them useful!
TIP ONE: Higher Standard Deduction for Seniors
If you and/or your spouse are 65 or older ( assuming you don’t itemize your tax deductions), you can actually get a higher deduction amount when you file your tax return. Another pro tip: there is an additional increase in standard deduction if either you or your spouse is blind.
TIP TWO: There’s a Higher Filing Threshold for Seniors
Did you know that 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? What this 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.
TIP THREE: 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.
TIP FOUR: Get the 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 a joint return with one qualifying spouse, or $25,000 if married, filing jointly when both parties qualify.
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.
TIP FIVE: No Penalties for Early Withdrawal
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.
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.