With age comes new opportunities, and this is especially true for seniors filing their tax returns. Many seniors are unaware of the tax deductions that their golden years gift them. Taking advantage of these tax opportunities can work wonders for minimizing stress, improving your financial situation, and providing you with more funds to make the most of this exciting chapter of your life. Still, only a tax professional has the expertise to identify the best deductions for your circumstances. Learn key deductions for seniors:
Key Deductions for Seniors Filing their Tax Returns
Increased Standard Tax Deductions
If your tax situation is relatively simple, you likely already receive a standard deduction when filing tax returns. Most people take the standard deduction instead of itemizing. By a simple situation, we mean circumstances like:
- You’re not a small business owner
- You don’t contribute large sums to charities
- You don’t itemize complicated deductions
In 2023, the standard deduction for a 64-year-old taxpayer, for example, will be $13,850. When a taxpayer is over 65 years old, the deduction increases to $15,700. The amount hinges on your filing status and changes year to year.
Determining whether or not this yields the most tax advantages requires the expertise of a tax accountant. For those with simple situations, this increased standard deduction may be the best option and eliminate the need to itemize deductions.
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Medical and Dental Expenses
For seniors who paid significant medical and dental expenses throughout the taxable year, these can offer key tax deductions when filing tax returns.
Essentially, seniors can deduct any medical expenses that exceed 7.5% of their adjusted gross income. These expenses refer to professional services paid to a doctor or dentist, not things like vitamins or health club payments.
Medical and dental expenses are often the most significant expenses for the elderly, which is a prime tax advantage to capitalize on. Deductible expenses include:
- Prescription drug expenses
- Mental health expenses
- Glasses
- Dentures
- Orthodontic appliances
- Costs incurred from medical appointments (like parking fees)
- Health insurance premiums
- Senior care services
It is crucial to understand that this deduction does not apply to those who receive employer-subsidized coverage. Ultimately, understanding what medical and dental expenses are taxable requires the expertise of a tax professional.
Tax Credits for the Elderly or Disabled
The tax credit for the elderly or the disabled is a tax advantage seniors should take advantage of when filing their tax returns.
This credit enables the elderly to deduct from the total amount owed to the IRS. With this credit, seniors can also receive a tax refund if the deducted sum outstrips what they owe. Taxpayers must be over the age of 65 or permanently disabled to qualify.
Your income cannot surpass a certain threshold, which changes each year. Work with an expert CPA to determine eligibility and understand how to take advantage of this credit.
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Social Security Tax Exemption
Seniors should know that Social Security earnings are typically exempt from federal income tax when they total less than $25,000 annually.
If these earnings are between $25,000 and $44,000, they only have to pay taxes on 50% of these benefits, which is a significant tax deduction for seniors filing tax returns. For individuals or couples who exceed this threshold, 85% of their benefits are taxable.
Need Helping Filing Tax Returns for Seniors? We Can Make the Most of Tax Deductions
Navigating the rules, regulations, and opportunities of filing tax returns is complicated. For some, a standard deduction will streamline and simplify the process. However, for those leveraging medical and dental expense tax deductions, for example, a standard deduction is not viable. Understanding what deductions you qualify for and how they impact each other requires the expertise of a professional CPA.
Fortunately, at Marcia Campbell CPA, our passion is providing tax preparation services to seniors that fortify their financial situation. Contact us to get started and learn more.