Filing Taxes in Retirement: 4 Facts You Should Know
No matter what age you are, filing taxes is always a dreaded chore. Filing taxes in retirement might be slightly simpler than filing when you were at the height of your earning days, but navigating your return can still be confusing.
Here are four pieces of information you should know when you’re filing taxes as a senior: these facts could save you money, time and cut down on any confusion you’re experiencing.
1. Your Social Security Benefits May Be Taxable
If Social Security is your only source of income, it is not taxable. If you collect no other income throughout the year, for tax purposes, your gross income is 0. You will not be required to file a federal tax return at all.
However, there are certain cases where both single and married seniors have to pay taxes on their Social Security benefits. If you earn other income during the year, you have to include your Social Security benefits into your gross income and determine if you are over the annual limits set by the IRS.
If you’re single and age 65 or over and earn over $11,850 during the tax year, you will have to file and pay taxes on a portion of your benefits. If you’re married and both you and your spouse are over age 65, you will have to file once you collectively earn over $23,100. If you’re age 65 or over but your spouse is younger, you have to file once you collectively earn over $21,850.
There are additional situations that may require you to pay taxes on your benefits, so talk to a qualified tax professional if you are unsure.
2. You Can Deduct Medical Expenses
When you file taxes in retirement, you have to follow the same procedure as before. You must decide whether to individually itemize deductions or simply take the standard deduction.
When you itemize, you are allowed to deduct all medical expenses once the costs exceed 7.5 percent of your adjusted gross income. Make sure to closely track how much you pay for out-of-pocket so you can see if itemizing your medical expenses helps you come tax time.
3. You May Be Eligible for a Tax Credit
If you do owe taxes, you can receive the credit for the elderly if you file using Form 1040 or Form 1040A and you are age 65 or over. Your income and your non-taxable Social Security benefits will have to be beneath a certain threshold to qualify. Each threshold varies depending on whether you are single or married.
4. You Can Get Free Tax Help
Do you have more questions about filing taxes in retirement? Don’t worry, you don’t have to stay in the dark. Get answers from a tax professional without paying a hefty fee. Thanks to the AARP Foundation Tax-Aide, seniors can get free tax assistance at one of over 5,000 locations.
You don’t have to sign up for a membership to be eligible. Just go to the website and find a library or senior center near you that offers the service and you will be well on your way to filing taxes without all the stress.
Tax time is the perfect time to assess the state of your finances. Are you paying more for healthcare and prescriptions than you’d like? Would you like to find out how a supplemental insurance plan could cut down your out-of-pocket costs? Talk to My Senior Health Plan today and explain your situation – there is a full team of caring insurance advisors ready to help you live better and within budget.
