4 Senior Tax Savers to Pump Up Your Piggy Bank
Did you know the IRS gives free tax advice to seniors age 60 and up through its Tax Counseling for the Elderly Program? It’s just one of the ways the federal government tries to help older Americans make ends meet.
Are you one of the millions of retirees on a fixed income? If so, these senior-friendly tax breaks might come in handy.
Credit for the elderly and disabled. If you owe the IRS, this credit — which ranges between $3,750 and $7,500 — could cut your tax liability dollar for dollar. To qualify, you must be 65 or older or have a permanent disability for which you are receiving taxable benefits. Income limits apply.
Want to see if you’re eligible? Go to the IRS Interactive Tax Assistant at irs.gov/help/ita and click “Do I Qualify for the Credit for the Elderly or Disabled.”
Medicare premiums. The IRS considers Medicare premiums — those paid for Medicare parts B and D, Medigap, and Medicare Advantage — deductible medical expenses. To benefit, most seniors who itemize can write off unreimbursed, qualified medical expenses that exceed 10% of their adjusted gross income (AGI).
Let’s say, for example, your AGI comes to $20,000. You’d be able to deduct any qualified medical expenses over $2,000.
Long-term care payments. The premiums you pay for qualified long-term care insurance policies are also considered medical expenses. That means you can add them to your Medicare premiums and other qualifying costs when you calculate your itemized deduction.
But be aware that the IRS caps the size of the long-term care deduction, depending on the taxpayer’s age. For someone between the ages of 60 and 70, the max is $4,220. Older than 70? You can deduct up to $5,270.
Generally, seniors who run their own businesses don’t have to itemize or meet the AGI spending threshold to take a medical deduction. But they can’t go over the government’s limits on deduction amounts.
Looking for a Tax Counseling for the Elderly program near you? Go to irs.treasury.gov/ freetaxprep or call 800-906-9887. The IRS-certified volunteers who provide free tax counseling often specialize in questions about pensions and retirement-related issues unique to seniors.
Qualified charitable donations. Have to take an income-boosting — and taxable — required minimum distribution (RMD) from your IRA? Consider donating the funds to charity. The IRS lets seniors who have reached the age of 70 1/2 directly transfer up to $100,000 from their IRAs to a qualified charity. The gift won’t be included in your adjusted gross income, and may help you stay below the cutoffs for taxation of your Social Security benefits.
But don’t take the RMD as income before donating, advises Raymond Wilson, a metro Atlanta-based certified public accountant who has prepared taxes for five years. “The check has to be written to the charity, not to the individual who then writes a check to the charity,” he says.
Why not? Funds sent to your bank count as taxable income.
- FC&A Staff Writer
