Trying to find standard tax deductions to make tax dues manageable can be pretty challenging for retirees and seniors. What are the different types of tax deductions elders can take advantage of? There are, in fact, quite a few. Read on, to know some of the tax deductions you may qualify for.
Standard Tax Deductions Retirees and Seniors Can Enjoy
- Charitable Donations
- Medical and Dental Expenses
- Retirement Account Contributions
- Selling Your House
- Standard Deductions
1. Charitable Donations
You might be surprised to hear that charitable donations qualify for standard tax deductions. If you’ve always loved to help and donate to noble causes, this is good news for you. If not, you might want to consider using your wealth for a good purpose, and get the added benefit of reducing your taxes. Here are some IRS rules on tax-deductible donations you need to know:
- Tax deductions, on charitable donations, only apply if you’re itemizing your expenses.
- The IRS allows taxpayers to deduct up to 50% of their adjusted gross income (AGI) as donations.
- When donating properties to a charity, you can deduct it’s fair market value.
- When donating cars, airplanes, or boats, the allowable deduction is limited to the profits the charity gets if they sold them.
2. Medical and Dental Expenses
Senior citizens and retirees spend much of their income on medical and dental expenses. You can deduct these from your tax liabilities when itemized. These expenses include health insurance premiums, prescriptions drugs, and expenses on nursing homes. Like charitable donations, there are rules that limit deductions for medical and dental expenses:
- The law says medical and dental expenses, over 10% of a taxpayer’s AGI, are deductible.
- If you’re 65 or older, you’re exempted from the 10% limit until 2017. You can use the previous 7.5% threshold on medical and dental deductions.
3. Retirement Account Contributions
— Wealthy Retirement (@WealthyRetire) December 17, 2017
Retirees can also enjoy tax deductions, when they open and contribute to Individual Retirement Accounts (IRAs). With traditional IRAs, for example, depending on your income and filing status, you can enjoy a partial to full deduction of your contribution limit. With Roth IRAs on the other hand, you’ll have to pay taxes for your contributions; but you’ll enjoy tax-free income and distributions.
4. Selling Your House
Senior citizens, often move to smaller spaces, or use home or retirement care services. If this is part of your retirement plan, would you be surprised to know that you can sell your house (if you’ve lived long enough as per IRS rules) tax-free? Yes, that’s right. If you’re a resident in a house you own for at least, two years prior to selling it, you won’t be taxed for your profit.
Note: Single taxpayers can enjoy a tax break of up to $250,000, and married taxpayers filing jointly, can receive up to $500,000.
5. Standard Deductions
When you choose not to itemize your tax deductions, you can opt for the standard deduction. This is the portion of income that the IRS doesn’t tax, effectively reducing your dues. The IRS bases standard deductions on your filing status, age, if you have a disability or not, and if you are stated as a dependant on another person’s tax return.
These are the standard deductions for the tax year 2017:
- $6,350 for single taxpayers
- $6,350 for married taxpayers filing separately
- $12,700 for married taxpayers filing jointly
- $9,350 for heads of households
Because of the fixed amount, this is one of the most common standard tax deductions taxpayers take advantage of.
You can watch this video by How to Adult to find out what other tax deductions you can use:
We try our best to work hard and save, in other to retire comfortably and happily. But even at this stage of life, we can’t escape our tax duties. Finding ways to reduce the taxes we owe can be a little challenging. Make sure to consider our list when filing your next tax return.
Do you have any tax deduction tips? Share them with us in the comments section below!
Up Next: Are Tax Preparation Fees Deductible?