There are many ways through which the elderly can reduce their income taxes. Approximately 13% of the U.S. population is over the age of 65, and a large percentage of seniors are on fixed incomes. Reducing tax liability is necessary for many individuals, as senior income doesn’t usually increase when living expenses increase.
Here are a number of tax credits and deductions that an elderly person is likely to qualify for:
Tax Deductions and Tax Credits Specific to Senior Citizens
The following credits and deductions are available for senior citizens to help reduce their tax liability:
Increased Standard Deductions
If you are a senior over the age of 65 and do not itemize tax deductions, you can increase your standard deduction by an additional $1,150 or $1,450 (for 2011 and 2012) depending on your filing status.
Real Estate Tax Credits
Some states will allow seniors who own a home to take a tax credit for a percentage of their real estate taxes. Check with your state taxation department for eligibility requirements.
A Tax Credit for the Elderly
If you are at least 65 years old or permanently disabled and you meet the income requirements for your tax filing status, you may qualify for the Credit for the Elderly or the Disabled. The following income limits are for adjusted gross income (AGI) and nontaxable pensions, including Social Security income (for tax year 2011):
Adjusted Gross Income Limit
Non-Taxable Pension Limit
|Single, Head of Household or Qualifying Widow(er)||
|Married Filing Jointly + Both Spouses Qualify for Credit||
|Married Filing Jointly + One Spouse Qualifies for Credit||
|Married Filing Separately + Spouses Did Not Live Together||
In-Home Care Services
If an individual has an in-home care provider, you will need to distinguish between whether or not the individual is a household employee or a contractor. The caregiver is considered an employee if he or she only works for you, and you decide the hours they work and in that case, you will need to withhold payroll taxes, income taxes, Social Security and Medicare and make an employer matching contribution to both Social Security and Medicare on the individual’s behalf. If you have an in-home caregiver employee, you must also file taxes like a “business” – quarterly and annually.
If your in-home caregiver provides medical services, the cost of medications, bathing and grooming are eligible for the medical expense tax deduction.
Medical Expense Tax Deduction
This is a deduction that is available to anyone regardless of age, but the elderly are more likely to qualify for it. If your medical expenses are more than 7.5% of your AGI, you can deduct your medical expenses. With the fixed income of most senior citizens and the increased need for medical care as we age – this is generally a money saving deduction for the country’s elderly.
Allowed medical expenses include prescription drugs, insurance premiums, long-term care insurance premiums, nursing homes, and other items such as dentures or wheelchairs.
Senior Tax Preparation Services
The AARP Foundation sponsors a free tax preparation service called Tax-Aide, available for individuals over the age of 60. Last year, over 35,000 volunteers assisted seniors with 2.6 million tax returns using IRS provided software. The preparers were able to file senior tax returns for free and electronically file both federal and state returns free of charge.
Don’t get too teary eyed for the superwealthy. They employ accountants to figure every tax break known to man. Some Billion dollar corperations pay less tax then low-income families. The flat tax of 10% that is floated in campaign platforms now and again would seem to level the playing field and remove a huge amount of power from the IRS.. Though, when politicians begin to attach their amendments, any benefits to Joe Worker would most likely go right down the tax drain. Short take? What we got ain’t bad and it’s worked reasonably well a long time. wheresthebeef