Tax Tips for Seniors

Tax Tips for Seniors

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Tax season certainly can be a stressful time of year for many people. By the time you’re a senior, that feeling doesn’t necessarily change, but the way you file your taxes does. When it comes to your taxes, you should be sure to consult a tax attorney well versed in eldercare tax law.  The AARP also offers free assistance and tax tips for seniors through their Tax-Aide program.

A senior, for tax purposes, is someone who is 65 years of age or older in the year that they are filing taxes.  There are two ways that you can reduce the amount of money you owe in taxes: deductions and credits. Deductions reduce amount of money that is taxable, while credits reduce the about of tax a person owns.

Below we list some tax tips that you or your senior loved one want to be sure to take advantage of. 

Medical and Dental Deductions

You can claim deductions on a range of out-of-pocket medical expenses. The IRS defines medical expenses as, “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body”. 

These expenses include payments for legal medical services performed by physicians, surgeons, dentists, and other medical practitioners. Seniors are allowed to deduct any medical or dental expense over 7.5% of their adjusted gross income.

For a full list of what expenses are deductible and for more information, head to the IRS website and search for Publication 502 for the most up to date information.

Credit for the Elderly or Disabled

If your income falls below a certain level and you are over the age of 65 or have a permanent disability, you are eligible for this credit. This credit will reduce the amount that you owe for taxes.

Standard Deduction for Seniors

If you are aged 65 or older and don’t itemize deductions, you are eligible for a higher standard deduction. You can visit the IRS website for detailed information on standard deductions.

Taxable Social Security

Your Social Security may be taxable if you receive income in other ways such as pensions, wages, taxable and nontaxable investment income.

The IRS has a publication to help you determine if any of your benefits are taxable.

State-level real estate tax credit

If you a senior that owns your home, depending on what state you live in, you may be eligible for a partial reduction of your real estate taxes.

Hiring In-Home Care

If you hired in-home care that you hired directly (not from an in-home care agency), that worker is likely considered a household employee. In that case, you or your elder loved one are responsible for the tax obligations of your in-home care aide.

This can greatly affect your taxes because this means you are responsible for paying the employer’s portion of the aide worker’s unemployment, Social Security and Medicare taxes.

It should also be noted that any nursing services provided by a home care aide, including bathing, grooming, and giving medication, qualify as deductible medical expenses.

If you need further information, you should contact a tax professional familiar with eldercare tax issues. The IRS also provides information regarding Household Employers in Publication 926.

Property Tax Exemptions for Older Home Owners

Many states offer property tax exemptions of deferrals for elderly, veteran, or disabled homeowners. You can take advantage of some of these opportunities:

Senior Tax Exemption

Many states will offer property tax relief or refunds for elderly people and the disabled. There are income and age restrictions that may vary by state.  In some places seniors only need to be 60 years of age (compared to the typical age of 65) to have their property taxes reduced.

Property Tax Deferral

If you are a low-income senior homeowner who is unable to pay off your property tax, you may be able to defer it. Qualified seniors can defer some or all of their taxes and pay it back when the property is sold or passed on to an heir.

Military Veteran Tax Exemption

Veteran homeowners can get a property tax exemption if they meet some basic requirements. These conditions vary by state however:

  • Use the home as their primary residence
  • Served during a war time
  • Were honorably discharged

There may be other requirements like length of residency, income restrictions, or disability to qualify. Parents of veterans who died in service or spouse of the veteran may also qualify for tax exemption. Check with your local tax office.

Green Energy Incentives

Did you or your senior loved one install any renewable energy systems in your house? This may pay off on the amount you owe on property tax. A list of all state and local incentives for renewables and energy is available online.

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