6 Tax Deductions Seniors Might Not Know About
The official tax filing day in the U.S. is Tuesday, April 18 this year. And if you’re trying to qualify for every deduction you can, you need to know what’s available to you before you drop your tax return in the mail or hit the “submit” button when you e-file.
The good news is that with age, you not only reach the glory days of retirement, but you can also qualify for additional tax deductions that can help you keep more of your nest egg to yourself. To help you reduce your tax liability and manage your expenses as a senior citizen, here are six tax deductions that you might not know about.
Higher Standard Deduction for Seniors
If you’re not planning to itemize your taxes when you file, the following might be of interest.
Taxpayers ages 65 and older qualify for an increased standard deduction, which will reduce their taxable income and overall tax liability, said Brad Paladini, tax attorney and owner of Paladini Law.
“This benefit acknowledges the additional financial burdens many seniors face and can help alleviate some of the tax-related stress during retirement,” Paladini said. “For 2022, the standard deduction for single taxpayers or taxpayers who file separately is $14,700. The standard deduction is $25,900 if the taxpayer files jointly, and it’s $25,900 for widows.”
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Medical and Dental Expense Deductions
Sometimes forgoing the standard deduction in favor of itemizing can work out for the best.
“For senior citizens with significant medical and dental expenses, itemizing these costs can be advantageous if they exceed 7.5% of adjusted gross income (AGI),” Paladini said. “This includes prescription medications, doctor visits, dental treatments, and even long-term care insurance premiums.”
You can also deduct transportation expenses that were essential to medical care, such as fares for a taxi or out-of-pocket costs for gas, oil, tolls and parking. You can also choose to use the amount of the standard mileage rate instead of actual costs for gas and oil, which was 58.5 cents per mile for the first six months of 2022 and 62.5 cents per mile for the last six months of last year.
Home Sale Exclusion
If you sold your home in 2022, you might qualify for this exclusion.
“When selling a primary residence, seniors may be eligible to exclude up to $250,000 of the gain from their income ($500,000 for joint filers),” Paladini said. “To qualify, homeowners must have owned and occupied the property as their primary residence for a minimum of two of the five years preceding the sale.”
However, Paladini cautioned that even if there was no gain from the sale of your home, you still need to report the sale on your return.
Retirement Plan Contribution Deductions
Just because you’re of retirement age doesn’t mean you have to stop working.
“Working seniors with earned income can still contribute to an IRA, 401(k), or other retirement plans,” Paladini said. “Contributions to traditional IRAs and 401(k)s are typically tax-deductible, reducing taxable income and potentially lowering tax liability.”
Tax Credit for the Elderly
“Some seniors may qualify for a nonrefundable tax credit based on age, filing status and income,” Paladini said. “This credit can help offset tax liability and is worth investigating for eligibility. It ranges from $3,750 to $7,500.”
According to the Internal Revenue Service, to qualify for this credit, you’ll need to be at least age 65 or retired on permanent and total disability with taxable disability income for the tax year. You’ll also need an adjusted gross income or income from Social Security, pensions annuities or disability income that’s under specified limits.
Property Tax Relief Programs
“Many states and local jurisdictions offer property tax relief programs designed to assist senior citizens. These programs can reduce property taxes owed and are worth exploring through local tax offices,” Paladini said.
According to The Mortgage Reports, to qualify for property tax relief programs in most states, you have to meet a state’s minimum age requirements — usually ages 61 to 65 — and the property you’re claiming the exemption on must be your primary residence.
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