April 15 is just around the corner, which means it is the height of tax season. Whether you’re an older adult or you provide care for someone who is, there are some helpful tax tips seniors. Here are our favorites:
Getting the help you need
If you are comfortable navigating the Internet, there are a plethora of online resources to help you prepare taxes, specifically aimed at concerns for older adults. The Internal Revenue Service itself has an entire site dedicated to seniors and retirees who are filing taxes. Here you can find out how to file, how the health care laws affect your filing, and more. AARP has long been a trusted source of information for seniors. The AARP Foundation has a tax aide website with articles and guides to make the tax season easier.
If you would rather call or visit a tax professional near you, AARP can help there as well. The Tax-Aide program offers free tax preparation at more than 5,000 locations nationwide through its Tax-Aide Locator.
Figuring out deductions
An article on NOLO.com expands on seven tax deductions tips for seniors. The list includes the standard deduction, business expenses, charitable contributions, and selling your house, medical expenses, retirement contributions and investment expenses. The best way to earn money when you retire is in the form of interest, dividends, and capital gains from investments. Dividends and capital gains are taxed at lower rates than ordinary income, ranging from 0% to 20% depending on your overall income tax bracket. Unlike income from a job or business, these types of income are not subject to Social Security or Medicare taxes. In addition, fees you incur for investment advice or accounting services are deductible to the extent they, along with your other itemized personal deductions, exceed 2% of your adjusted gross income. Examples include:
attorney and accounting fees
safe deposit box fees
subscriptions to investment newsletters
fees for online services
home computers used for investment purposes
fees to financial planners, and
fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock.
Filing on your own
It makes sense that individuals are more likely to make mistakes when preparing their tax returns than are professionals. But that does not mean you have to shy away from doing it yourself. Just keep in mind these tax tips for seniors straight from the IRS:
If you do not itemize your deductions, you can actually get a higher standard deduction if you and/or your spouse are 65 years old or older.
Be careful when you calculate the taxable amount of your social security. You can use worksheets with instructions provided by the IRS to help you figure it out.
Keep in mind you have to file a 1040 or 1040A in order to receive the Credit for the Elderly or Disabled.