Tax season is here again. Before you start filling your tax returns, consider the tax benefits available to senior citizens. Did you know that those aged 65 or older receive an additional $1,600 deduction?
In addition, the U.S. government recently passed the Tax Cut and Jobs Act (TCJA). This sweeping overhaul to the tax code largely has a positive impact on senior citizens.
Read on to learn more about the standard deduction for seniors. Explore popular deductions and tax benefits designed to help seniors thrive in today’s economy.
Enhanced Standard Deduction for Seniors
One of the advantages of turning 65 is that you can claim a larger standard deduction. Tax filers aged 65 and older receive an additional $1,600 standard deduction.
In addition to the standard deduction for seniors, the TCJA also doubled it for all other filers. This alone is a great benefit to seniors. Below is a list of changes to the standard deduction based on your filing status:
- Single filers – increased to $12,000 from $6,500
- Married filing jointly – increased to $24,000 from $13,000
- Qualified widow(ers) – increased to $24,000 from $12,700
- Head of household – increased to $18,000 from $9,550
For the vast majority of seniors, the changes to the standard deduction are advantageous. In most cases, they don’t need to itemize their tax deductions due to these changes.
Filing Requirements for Seniors
You may not need to file taxes if your income is below a certain threshold. Thanks to the new standard deduction for seniors, more elderly Americans will skip this step.
For single filers aged 65 or older, any income below $13,600 doesn’t need to be reported. For married couples, this threshold increases to $26,600.
The thresholds outlined above only include income and don’t account for social security benefits.
Only a portion of social security benefits is taxable. The reporting threshold increases even more when non-taxable social security is added to the equation.
For a married couple, the reporting threshold could be as high as $32,000. The U.S. Internal Revenue Service suggests to carefully calculate the non-taxable portion of social security using form 1040 instructions.
One important change for the reporting requirement involves personal exemptions. In the past, the reporting threshold included the standard deduction plus any personal exemptions claimed.
The TCJA eliminated personal exemptions so only the standard deduction for seniors is pertinent. Even with the removal of personal exemptions, the new standard deduction for seniors is still more beneficial.
Itemizing vs. Standard Deduction
Each year, tax filers decide whether to itemize their deductions or claim the standard. The positive changes to the standard deduction solve this dilemma for most filers.
However, there is a certain percentage of seniors that may still decide to itemize. The decision boils down to having enough itemized deductions to exceed the standard threshold, which ranges from $13,600 to $25,600 depending on the filing status.
There are many deductions that a tax filer can claim. One popular tax deduction is state and local tax, or SALT for short. SALT allows you to write off items like state income and property taxes.
The medical expenses deduction is especially popular for seniors with high medical bills. Continue reading for a detailed description of this impactful deduction for seniors.
Medical Expenses Deduction
If you decide to itemize, then medical expenses may be deductible as well. This deduction allows the tax filer to write off all medical expenses exceeding 7.5 percent of adjusted gross income (AGI).
Many Americans don’t have enough medical expenses to qualify for this deduction. Obviously, seniors require more medical attention and often reach the 7.5 percent AGI threshold.
The key to calculating this deduction is understanding what qualifies as an acceptable medical expense. From a broad perspective, things like preventative care or assisted living qualify. Other more significant items like surgeries and prescription drugs may qualify too.
Dental and vision expenses are also covered. Qualified expenses include psychological and psychiatric care as well.
Perhaps the best way to understand the deduction is to learn what’s not included. For example, drugs purchased over-the-counter and cosmetic procedures do not qualify.
If you use funds from a Flexible Savings Account (FSA) or Health Savings Account (HSA), the expense is no longer deductible. Any questionable items should be checked using the IRS’s deduction eligibility tool.
Other Deductible Medical Expenses
Many people overlook non-traditional medical expenses that are qualified deductions. A big one is that rent and utilities for a space covered by a medical professional are deductible.
If a doctor prescribes dietary supplements or foods, the costs are deductible. Special furniture recommended by a doctor or a service animal also qualifies.
You can even deduct travel costs such as mileage, tolls, and parking when driving to a medical visit. Our suggestion is to collect all receipts for anything that can be construed as a medical expense. Then, look for IRS guidance when filing season begins.
Credit for the Elderly
In addition to the positive standard deduction for seniors, there is also a tax credit available.
One requirement is that you submit a form 1040 or 1040A to the IRS. The second requirement is that you are aged 65 years or older. The age requirement is lifted if you’re fully disabled.
The final requirements are income and filing status. Depending on filing status, you may be eligible for the credit if your AGI is less than $17,500 for a single filer. The threshold increases to $25,000 for married couples who file jointly.
A Recap of Tax Advice for Seniors
Many seniors are living on a tight and fixed monthly budget. This makes every cent that you can keep from Uncle Sam super important.
The good news is that the TCJA includes many perks for the elderly. One of the most significant advantages is a doubling of the standard deduction for seniors. If you enjoyed this article, check out our other resources for more great pieces.