All of our golden years come with plenty of pros and cons. For some, it brings an opportunity to retire, to spend more time with family and to spend money saved over decades of working on more enjoyable ventures. For others, aging brings changes like moving to a new community or taking on a new career opportunity. However, entering your senior years brings everyone to the same set of questions when approaching lifelong tasks that now look a bit different. Do senior citizens pay less at the movies? Do senior citizens get discounts at restaurants? Do seniors get an extra tax deduction?
Luckily for America’s seniors, the answer to all three questions is yes! And with tax time right around the corner, it is important to know that the tax code offers quite a few deductions and credits exclusively for older adults.
Tax Deductions and Credits
If you are a senior citizen preparing your own taxes, or if you are a caregiver helping an elderly loved one, you want to find every opportunity to save money. Here are five credits and deductions available to senior citizens:
Standard Deduction for a Senior Citizen
For the year 2020, the additional standard deduction for married taxpayers who are age 65 and over, or who are blind, is $1,300. For single taxpayers age 65 and older, those filing as head of household or those who are blind, the additional standard deduction for seniors is $1,650. Both of these amounts are the same as in the tax year 2019.
Assisted Living Deduction
For senior citizens living in assisted living communities, there is another deduction available. Medical expenses, including qualifying long-term care expenses, are deductible if the expenses add up to more than 10-percent of your adjusted gross income. Before filing, make sure your deduction meets the Internal Revenue Service (IRS) requirements.
Retirement Plan Contribution Deduction
Seniors who are retired, or even semi-retired, are still able to make tax-deductible contributions to their retirement plans, including IRAs. For individuals over the age of 50, there are also higher contribution limits for traditional IRAs, 401(k)s and Roth IRAs.
Health Savings Account Deduction
Seniors with a high-deductible health plan are eligible to claim a tax deduction on contributions made to a health savings account (HSA). Distributions from HSAs are tax-free when they are used to pay for qualifying medical expenses. Americans who reach age 55 or older by the end of the tax year qualify to contribute up to $4,600 to an HSA in the year 2021, which is $1,000 more than younger tax payers. Please note that you cannot contribute to an HSA after you enroll in Medicare.
Elderly or Disabled Credit
This senior tax break is based on age, income and filing status. You may quality for the credit if you and/or your spouse are either 65 years old or older or if you are permanently disabled. The income requirements, found on Form 1040 line 38 are as follows:
- Your income is less than $17,500 for individuals
- Your income is $20,000 or less for married filing jointly and only one spouse qualifies
- Your income is $25,000 or less for married filing jointly and both spouses qualify
- Your income is $12,500 or less for married filing separately and living apart from your spouse for the entire year
- The non-taxable part of your Social Security, or other non-taxable pensions, is less than $5,000 for single, head of household or qualifying widow(er) with a dependent child
- The non-taxable part of your Social Security, or other non-taxable pensions, is $5,000 for married people filing jointly and only one spouse qualifies
- The non-taxable part of your Social Security, or other non-taxable pensions, is $7,500 or less for people married filing jointly and both spouses qualify
- The non-taxable part of your Social Security, or other non-taxable pensions, is $3,750 or less for people married filing separately and living apart from your spouse for the entire tax year
To qualify, remember to file using Form 1040 or Form 1040A to receive the Credit for the Elderly or Disabled.
Tax Tips
Understanding the deductions and credits available is a large part of helping seniors get a tax break. Here are a few additional tips to make the entire process less stressful for all involved:
- When preparing a tax return for a senior, remember to be careful when calculating the taxable amount of Social Security. You can use the Social Security benefits worksheet found in the instructions on Form 1040 and Form 1040A to make sure your numbers are correct.
- Remember, people 65 years old and older can earn a gross income of up to $14,050 before they are required to file a tax return for the tax year 2020. This is a larger amount than younger workers and is important to note. The tax threshold for couples both age 65 or older is $27,400 and it is $26,100 if one spouse is 65 or older.
- Not only is there help for seniors to get tax breaks, there is help for filing taxes, as well! The Tax Counseling for the Elderly (TCE) program provides free tax help for Americans age 60 and older. This IRS-certified program assists older taxpayers between January 1st and April 15th every year and specializes in tax issues typically faced by seniors, including questions about pensions and retirement benefits.
Supporting Seniors at Every Stage
From tax questions to matters of care, finding the right experts to help answer questions can be difficult in our senior years. The Tutera community is prepared to help you and your loved ones navigate the complicated questions of retirement and senior living, all while providing a personalized experience. To learn more about the Tutera communities, visit our website or call 877-988-8372.
