Please note the following tax due dates on your calendar, and come back often to keep up with the changes.
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Six Tax Tips for Older Taxpayers
Older Americans want to save money on their taxes, and we want to help. If you’re 50 years of age or older, these six tax tips could help you keep more money in the bank.
1. Standard Deduction for Seniors: If you and/or your spouse are 65 years of age or older and do not itemize your deductions, you can use a higher standard deduction amount. If you or your spouse is blind, an additional increase in the standard deduction can apply.
2. Credit for the Elderly of Disabled: If you and/or your spouse are 65 years of age or older OR under 65 years old and permanently or totally disabled, you may qualify for the Credit for Elderly or Disabled. This credit is determined based on age, filing status and income.
You may only use the credit if you meet these requirements:
Your Form 1040-line 38 income must be less than $17,500 if individual, $20,000 for married filing jointly (if only one spouse qualifies), $25,000 if married filing jointly and both qualify or $12,500 if married filing separately and lived apart from your spouse for a whole calendar year.
The non-taxable portion of the individual’s Social Security or other nontaxable pensions, disability income or annuities is less than 5,000 for single, head of household or qualifying widow/er with dependent child, $5,000 for married filing jointly and only one spouse qualifies, $7,500 for married filing jointly and both qualify, or $3,750 for married filing separately and lived apart from spouse for a whole calendar year.
3. Retirement Account Limits Increase: If you are 50 or older, you are eligible to contribute up to $24,000 in 2018 and up to $25,000 in 2019. You can also defer paying tax on these contributions. The amount includes an added $6,000 “catch up” contribution for those 50 and over who have a 401 (k), 403 (b), most 457 plans or the federal government’s Thrift Savings Plan.
4. Early Withdrawal Penalty Eliminated: If you withdraw money from an IRA account before the age of 59 and a half, there is typically a 10% penalty attached (with a few exceptions, call the office to find out if they apply to you.) After the age of 59 and a half, the penalty for early withdrawal does not apply to you. Additionally, if you leave or are terminated from your job at the age of 55 or older (50 for public safety employees), you may withdraw money from a 401(k) without penalty, though tax on the additional income will still apply. Money withdrawn from an IRA is not exempt from the early withdrawal penalty.
5. Social Security Benefits: Americans can sign up to start receiving Social Security benefits as early as 62. To receive the full benefits, Americans must wait until age 66 or 67, depending on one’s full retirement age. For some older Americans, Social Security benefits may be taxable. To understand this, we must first know that how much of one’s income is taxed is dependent on the amount of one’s benefits plus any other income one receives. Generally speaking, the more income you have coming in, the more likely you are to pay taxes on a portion of your Social Security benefits. When preparing your tax return, you are thus cautioned to be very careful when calculating the taxable amount of your Social Security.
6. Higher Income Tax Filing Threshold: Taxpayers 65 and older are permitted an income of $1,600 or more (or $2,600 if married filing jointly and both spouses are 65 or older) before they must file an income tax return. This means that taxpayers 65 and older with an income of $13,600 or less (or $26,600 or less if married filing jointly) may not need to file a tax return.
If you have questions about any of these tax tips for older Americans, please call our office! We will gladly walk you through these and any other tax deductions or credits that you may qualify for.