Important Tax Tips for Seniors

Entering retirement is a completely new phase of life not only in terms of career and possibly in terms of your living situation, but financially as well. Employer income typically replaced with Social Security and combined with either a pension or IRA/401K withdrawal. On top of that, you still may be maintaining a part-time job on the side for additional income. Seniors Tax Help

The financial changes retirees face can sometimes have an adverse effect on their taxes, especially if they are not aware of how these varying income sources are treated by the IRS. Here are some helpful tax tips to help seniors avoid pitfalls during tax season:

Understand the Social Security Exemption: Up to a certain income level, Social Security income is not subject to tax. If you are a single filer and your provisional income is $25,000 or less, you will not be taxed on your Social Security benefits. If you are married filing jointly, the threshold goes up to $32,000.

What is provisional income? Provisional income is the total of your combined net income from jobs, pensions, interest, dividends, and all other sources plus half of your net Social Security benefits. If this amount exceeds the figures above, you are subject to tax on a portion of your Social Security income.

Find out if you qualify for the Senior Tax Credit: Many seniors qualify for a tax credit that for the elderly or disabled. To be eligible, you must meet the following qualifications:

• Be a U.S. citizen, U.S. permanent resident, or a non-resident alien that is married to a U.S. citizen.

• Be age 65 or older or under age 65 with a total and permanent disability for which you are collecting disability benefits.

• Have an adjusted gross income (AGI) of $17,500 or less for a single filer or $25,000 or less for married couples filing jointly.

Itemization vs. Standard Deduction: During your working years, you may have become accustomed to itemizing your deductions; when you have a home mortgage, real estate taxes, charitable donations and other such deductions, it is most often advantageous to itemize. However, if your mortgage is paid off, this significantly reduces your available deductions. For this reason, it is important to examine both the standard deduction and itemization to find out which will give you a greater savings. In many cases, seniors are better off taking the standard deduction.

Avoid Tax Scams: Today more than ever before, tax scams are wreaking havoc on vulnerable taxpayers. And as you may have guessed, these perpetrators prey especially on the elderly. If you take nothing else away from this article, understand this; the IRS will NEVER call you on the phone to tell you that you owe them money. If you do have a legitimate tax issue, the IRS will almost always initiate contact with a letter in the mail. Today, scammers are even able to make the caller ID appear as if they are calling from “Internal Revenue Service”, so if you see that come up, the best thing to do is not engage these people. Simply hang up and report the incident by contacting the Treasury Inspector General for Tax Information (TIGTA) at (800) 366-4484 or

Work with an Accounting Firm: There are numerous other ways to save money on taxes depending on your individual circumstances, the types of investments, income sources and other related factors. To ensure that you remain in the best financial position possible, it is always best to have your taxes prepared (or at the very least reviewed) by your local tax professional.

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