Some might say there aren’t a lot of benefits to getting older besides getting wiser, but they would be wrong, at least when it comes to taxes. In case you weren’t aware, the IRS offers specific tax deductions for seniors that can save you money on your taxes, year after year.
Tax Tips for Seniors 2016
There are several senior citizen tax deductions that you should consider before filing your 2016 taxes. These include the following:
- The profit from selling your home – There is a good chance that, now that you are older and perhaps retired, you might like to sell your home, move to a warmer climate, and/or to be closer to friends and family. However, there is the issue of capital gains tax when you sell your home. However, there is a good chance you won’t have to worry about it. If you have lived in your home for two out of the last five years before selling it, you can have a profit of up to $250,000 for an individual and $500,000 for a married couple filing jointly and still not have to pay taxes on the profit.
- Property tax reductions – If you’re a senior and planning on keeping your home, you may be eligible for property tax breaks, and even school tax exemptions. These tax laws vary by state and municipality, so be sure to check with your tax preparer if your senior citizen status allows you to reap the benefits in terms of property taxes.
- Investments – Once you are retired, you may have turned to investing to provide additional income. This is a great idea and the profits from your investments are taxed at a lower rate, normally 15%. In addition, they are not taxed for Medicare or Social Security. However, you need to go a step further. There are expenses related to investing, and you need to take advantage of them. These can include, online brokering fees, accounting fees, safe deposit box fees, and so on. All of these fees can be deductions when filing your taxes.
- Long-term care expenses – If you or a loved one resides in an assisted living facility, you can deduct the cost of meals and housing. This deduction is contingent upon the person living in a facility due to a chronic illness or because they can no longer live alone. If you can’t perform activities of daily living, you may be eligible for these deductions.
- The disability and/or elderly credit – If you are 65 or older, or retired with a permanent disability, and your income is below $17,500 for an individual and $25,000 for a couple, you should be eligible for this credit. This credit can save / earn you between $3,750 and $7,500.
- Medical expenses – If you itemize your deductions instead of taking the standardized deduction on your income taxes, then don’t forget about your medical expenses. If your medical expenses exceed 7.5%of your adjusted gross income, then you can deduct them. As older adults tend to have much higher medical costs, these deductions can be big savings at tax time.
Whether you’re looking for deductions in 2016 or may soon be a senior yourself and looking ahead for tax tips for 2017, be sure to consult your professional tax advisor before filing your taxes and ask him or her about deductions for seniors.
Also, you may be eligible for free tax return preparation sponsored by the IRS through several volunteer assistance programs. These programs help seniors and people with low-to–moderate incomes with filing their taxes.
By doing your “homework” and understanding what deductions and services are available to you, you could save a lot of money. And that’s never a bad thing.
Have you or your loved one received any specific tax breaks? What tax laws would you want someone to be aware of to help offset the costs of aging around tax time? Let us know in the comments below!