The painful annual process of completing your taxes is daunting at any age, and it often does not get much easier as you leave your working years behind. The woes of tax season for senior citizens can be compounded by some of the challenges associated with aging, when new technology and evolving tax laws make an already complex process even more burdensome. Consequently, many older adults file improperly and/or overlook tax advantages that could enhance financial security for them and their families.
Sadly, opportunistic crooks know that some elderly filers get flustered about tax preparation, and they use misinformation to prey on vulnerable individuals. According to the National Council of Aging’s blog on economic security, it is estimated that American senior citizens lose more than a billion dollars a year to fraudulent websites and financial scammers, and much of that loss is rendered through the confusion of filing taxes. Identity thieves and IRS imposters take advantage of unsuspecting seniors every tax season.
Unless you have personal training in accounting or a trusted family member to help prepare your taxes, it is always smart to seek the help of a reputable and experienced tax professional. In addition to protecting you from predators, a shrewd financial firm can find exemptions and tax breaks you may not have known about otherwise. Overlooked deductions are missed income opportunities.
Finding additional tax savings for seniors
As tax regulations constantly change, new provisions and benefits that specifically reward seniors are always becoming available – but they are not always apparent. For example, did you know that after age 50, the annual contribution limits for your IRA and 401(k) actually increase? By taking advantage of those higher thresholds for contributions, you can strengthen your financial outlook while simultaneously reducing your overall taxable income.
Inevitable medical and dental expenses also offer more potential for tax benefits for seniors in 2019. Elder adults now are able to deduct any itemized medical expenses that exceed ten percent of their annual gross income.
If you are over the age of 65 (or you retired on permanent and total disability and have taxable disability income), you may qualify for a Credit for the Elderly. The IRS uses a formula to determine an individual’s eligibility, based on two income limits. The first is the amount of your adjusted gross income (AGI). The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. If your AGI and your nontaxable pensions, annuities, or disability income are less than the designated limits, you may be able to claim the credit. Again, it is recommended that you enlist the help of a professional tax adviser to calculate your eligibility.
Even in retirement, many seniors might be surprised to discover they still qualify for business-related tax deductions. If you operate a part-time side business, engage in professional consulting services, or provide contract work, the IRS allows you to claim multiple expenses and lower your tax liability.
Examples of such deductions include any money spent for your home office (from computers to furniture to paper clips) plus mileage used for travel related to your specific business pursuits. You also can deduct a portion of your total household utilities and mortgage payments, based on your home office’s square footage as a proportional fraction of your house.
Let a qualified tax adviser explain your best strategies
For elder citizens wanting to make the most of their retirement years, financial health can be just as important as physical well-being, and properly managed taxes are a vital element of any long-term financial security plan.
Obviously, tax issues are complicated and can be fraught with potential shortfalls. If you have questions about your tax liabilities and exemptions, you should always contact a professional to help explain the details for you.
The experienced elder law attorneys at TuckerAllen specialize in affordable smart solutions for wills, trusts, Power of Attorney documents, and other essential aspects of estate plans, including long-term provisions for special-needs adults.
TuckerAllen also offers complimentary educational webinars, where we explain a range of estate plan options and asset protection programs, all in terms that are easy to understand.