Tax Tips for Older Americans

Jan 8, 2019 | Newsletter

Tax Tips for Older Americans

Everyone wants to save money on their taxes, and older Americans are no exception. If you’re age 50 or older, here are six tax tips that could help you do just that.

1. Standard Deduction for Seniors. If you and/or your spouse are 65 years old or older and you do not itemize your deductions, you can take advantage of a higher standard deduction amount. There is an additional increase in the standard deduction if either you or your spouse is blind.

2. Credit for the Elderly or Disabled. If you and/or your spouse are either 65 years or older–or under age 65 years old and are permanently and totally disabled–you may be able to take the Credit for Elderly or Disabled. The Credit is based on your age, filing status, and income.

You may only take the credit if you meet the following requirements:

Your income on Form 1040 line 38 must be less than $17,500 ($20,000 if married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).

and

The non-taxable part of your Social Security or other nontaxable pensions, annuities or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).

3. Retirement account limits increase. Once you reach age 50, you are eligible to contribute (and defer paying tax on) up to $24,500 in 2018. The amount includes the additional $6,000 “catch up” contribution for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan.

4. Early Withdrawal penalty eliminated. If you withdraw money from an IRA account before age 59 1/2 you generally must pay a 10 percent penalty (there are exceptions–call for details); however, once you reach age 59 1/2, there is no longer a penalty for early withdrawal. Furthermore, if you leave or are terminated from your job at age 55 or older (age 50 for public safety employees), you may withdraw money from a 401(k) without penalty–but you still have to pay tax on the additional income. To complicate matters, money withdrawn from an IRA is not exempt from the penalty.

5. Social Security Benefits. Americans can sign up for social security benefits as early as age 62–or wait to receive full benefits at age 66 or 67 (depending on your full retirement age). For some older Americans however, social security benefits may be taxable. How much of your income is taxed depends on the amount of your benefits plus any other income you receive. Generally, the more income you have coming in, the more likely it is that a portion of your social security benefits will be taxed. Therefore, when preparing your return, it is advisable to be especially careful when calculating the taxable amount of your Social Security.

6. Higher Income Tax Filing Threshold. Taxpayers who are 65 and older are allowed an income of $1,600 more ($2,600 married filing jointly and both spouses are 65 or older) before they need to file an income tax return. In other words, older taxpayers age 65 and older with income of $13,600 ($26,600 married filing jointly) or less may not need to file a tax return.

Don’t hesitate to call the office if you have any questions about these and other tax deductions and credits available for older Americans.

There May Still Be Time to Lower Your 2023 Tax Bill

There May Still Be Time to Lower Your 2023 Tax Bill

If you're preparing to file your 2023 tax return, you may still be able to lower your tax bill - or increase your refund. If you qualify, you can make a deductible contribution to a traditional IRA right up until the original filing deadline, April 15, 2024, and see...

Tracking Down Donation Substantiation

Tracking Down Donation Substantiation

If you're like many Americans, your mailbox may have been filling up in recent weeks with letters from your favorite charities acknowledging your 2023 donations. But what happens if you haven't received such a letter for a contribution? Can you still claim a deduction...

How to Secure a Tax Benefit with the QBI Deduction

How to Secure a Tax Benefit with the QBI Deduction

QBI may sound like the name of a TV quiz show. But it's actually the acronym for "qualified business income," which can trigger a tax deduction for some small business owners or self-employed individuals. The QBI deduction was authorized by the Tax Cuts and Jobs Act...

Traveling for Business in 2024? What’s Deductible?

Traveling for Business in 2024? What’s Deductible?

If you and your employees will be traveling for business this year, there are many factors to keep in mind. Under the tax law, certain requirements for out-of-town business travel within the United States must be met before you can claim a deduction. The rules apply...