The Standard Deduction Is Most Common, But What Else Should You Be Taking Advantage Of?
Sometimes seniors miss out on viable tax deductions that might help save them money or increase the value of their annual return. The most common applied deduction is the standard deduction, which nearly doubled for 2019. This year, singles can claim $12,000 in the standard deduction while married couples filing jointly can claim $24,000. The higher amount is a benefit for many, but especially for seniors and retirees who may not have a mortgage or other expenses to itemize. However, there are other helpful tax deductions available, let’s take a look at the most beneficial.
Retirement Plan Contributions
Seniors who continue to work and even those who have reached semi- or full-retirement status can contribute to retirement plans. One great benefit though is that after the age 50, contributors may qualify for “catch-up contributions” which make it easier to contribute even more. And, even better, most contributions are tax-deductible
Medical Expenses Deduction
Medical expenses may be one of the biggest expenses that a senior will bear throughout the year. Most office visits, prescriptions, medical equipment and insurance premiums for both medical and dental count toward this deduction. However, there are certain limits and restrictions. Seniors can only claim expenses that go beyond 10 percent of their adjusted gross income (AGI). This means someone with an AGI of $50,000 can only claim expenses that exceed $5,000.
Sale of Home
This is more of a tax break than a deduction, but it bears mentioning. When retirement rolls around, some seniors sell their homes in favor of moving to a retirement community. Chances are, those who lived in their homes for an extended period of time have built up substantial equity over the years.
When the house sells, as long as the person owned it for a minimum of 2 years and lived in it as a primary residence for the 2 to 5 years prior to the sale, they can avoid paying capital gains taxes on the profits. There are limits, of course, and profits can’t exceed $250,000 for single people and $500,000 for married couples. Do note that capital gains, even if they qualify for the tax break, need to be listed on Schedule D.
If you’re a senior filing your taxes and you’re not sure which, if any, tax deductions you qualify for, it’s vital to speak with a tax or financial planning expert. These tax breaks can help save you money in the long run and they’re worth exploring, but there may be even more, so a quick visit could really pay off.
~Here’s to Your Financial Health!