Tax Day is quickly approaching – it seems to come faster every year. You’ve gathered all of your annual financial information for your accountant, but you retired last year and now you’re curious. Do seniors have to file taxes every year? Could this be the year you finally get a break from the tax man?
If you were expecting the answer to be a firm “no,” think again. Whether or not seniors have to file taxes depends on their total income. Even in retirement, taxes are still a constant. Ask yourself these questions before mid-April to determine whether you need to file, and how much tax you may owe.
How Much Did You Make in 2016?
For single seniors, those aged 65 and older, you must file a tax return if you earned $11,900 or more in 2016.
If your filing status is “head of household,” file a return if you earned $14,900 or more.
If you’re married and filing jointly, file a return if you and your spouse made $23,200 and both of you are 65 or older. If one of you is younger than 65, file a return if you collectively made $21,950.
Is Social Security Included in Gross Income?
Keep in mind – Social Security income is not included in those income thresholds. If you live on Social Security only, you do not need to file a federal income tax return.
There are some cases where Social Security income is included in taxable income. For example, during any tax year that the sum of your earnings plus half of your Social Security income exceeds $25,000, or $32,000 for married couples filing jointly, it is considered taxable income.
What About a State Return?
Do seniors have to file taxes at the state level? Each state adopts its own policy, but most follow guidelines similar to the federal government or consider Social Security income completely tax-exempt. Then there are states with no income tax at all.
There are a few special situations where seniors have to file taxes even if they don’t meet the minimum income thresholds. For example, if you earned money as a self-employed worker, you owe the government self-employment tax so you will have to file a return. If you owe penalties or an alternative minimum tax, you will also have to file.
Are You Eligible for a Tax Credit?
The good news? If you do have to file as a senior, you can take advantage of the elderly tax credit, which ranges between $3,750 and $7,500 and can reduce what you owe dollar for dollar.
Remember, it’s possible to write off any medical expenses too – another great way to lower your tax bill.
Already thinking about how to reduce your taxes for 2017? Save money by finding a tax-efficient health insurance plan that works for you – contact My Senior Health Plan today to learn about your options.