Source: US News Money - US News & World Report
If you have crossed age 50 and especially at age 65 and are preparing to file taxes this year, you can get some extra tax breaks. You can save more money before you get a tax return through a standard deduction. Check out how you can save money on taxes as you grow old.
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Source: Michigan Care Management Resource Center
If your age is 65 and more, you can qualify for a standard deduction of $7,850 if filing separately and $15,100 if both you and your spouse are age 65 or older and filing jointly. For the younger counterparts, the standard deduction is $6,300 if filing individually and $12.600 if married and filing jointly.
Barbara Weltman, spokeswoman for J.K. Lasser's Your Income Tax 2016 said that “if you don't itemize and you claim the standard deduction, there is an additional amount if you are 65 or older.”
When you’re 65 years of age and above you can earn up to $11,850 gross income ($23,100 if both spouses age 65 or older) before you have to file a tax return; which is $1,550 ($1,250 per partner) extra than the tax filing threshold for younger people.
When you reach age 59.5 you won’t have to pay an early withdrawal penalty if you withdraw money from your tax-advantaged retirement account. People less than 59.5 years of age have to pay a 10% early penalty if they want to get their hands on the money. However, withdrawals are tax-free from accounts like the Roth IRAs.
It is said that when we grow older we tend to spend more time in the doctor’s clinic. If you’re age 65 or older, you can deduct medical expenses on your tax return that exceed 7.5% of your adjusted gross income (AGI). Whereas, younger taxpayers can deduct medical costs that exceed 10% of their AGI.
As per Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block, "if it's a married couple, only one of them has to be 65 or older.” Perlman also mentioned that “you could have a 67-year-old and another spouse is only 61, but they both get that break."
How much you have to pay in property taxes vary by state and local jurisdiction. However, you are eligible to get property tax breaks if you are over 50 years of age and earn below a certain income level.
If you are age 50 and above, you can contribute $1,000 more to an IRA, or $6,500 in total in 2016. If you’re 50 years old, have maxed out your IRA and fall in the 25% tax bracket, you can save $1,625 on your current tax bill. This is, $250 more than the amount (that is, $1,375) younger people save in the same tax bracket.
When you are above 50 years you’re allowed to make an additional contribution toward your 401(k), 403(b) and some other retirement accounts. According to money.usnews, “Employees age 50 and older can defer paying income tax on $6,000 more than younger workers if they contribute that amount to a 401(k) plan, or a total of $24,000.”
The medical deduction isn’t the only way to save your precious dollars on medical bills. For 2016, you’re allowed to contribute $1,000 extra (if you’re 55 years and over) as a catch-up contribution. Whereas, families can contribute $6,750 (which was $6,650 in 2015) to their health savings account.
When you become a senior citizen you may not have to pay taxes unless your income reaches $11,850 and $23,100 if married. For the younger population, this threshold is $10,300 if single and $20,600 if married. If one is above 65 years and the other is younger, the amount is $21,850.
When you reach 70.5 years you have to withdraw some money from your individual retirement accounts (IRAs) known as required minimum distribution (RMD). You don’t have to pay taxes on this amount if you donate this money to a charity.
Don’t get over excited in getting a tax break that you completely ignore the fraudsters preying on your precious dollars. Tax fraud has become a common phenomena. Be extra cautious while filing taxes. So, what are you waiting for? Go grab the opportunity now!