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Many older Americans miss these deductions simply because they dont know about them.
Understanding these benefits can help you keep more of your hard-earned money in your pocket.
Who Qualifies as a Senior for Tax Purposes?
The IRS typically considers you a senior when you reach age 65.
The IRS counts you as 65 the day before your65th birthday.
Standard Deduction for Seniors
The IRS gives seniors a tax break through a higher standard deduction.
Once you reach 65, you qualify for an additional amount on top of theregular standard deduction.
This bonus deduction reduces your taxable income without requiring you to itemize.
This means less paperwork and potentially bigger savings.
Medical and Dental Expenses
As you age, healthcare costs often increase.
This includes doctor visits, hospital stays, prescription medications and even certain home improvements for medical purposes.
Keep detailed records of allhealthcare expensesthroughout the year.
Property Tax Deductions or Credits
Property taxes can be a significant expense for senior homeowners.
The federal tax code allows you todeduct property taxesas part of your itemized deductions.
Many states also offer special property tax relief programs specifically for seniors.
These may includefreezes, exemptions or deferralsbased on age and income.
Check with your states tax agency to learn about local programs that might reduce your property tax burden.
Charitable Contributions
Donations to qualifying organizations canprovide tax benefits.
Seniors who are 7012 or older have a special opportunity through Qualified Charitable Distributions (QCDs).
These allow you to transfer up to $100,000 annually from your IRA directly to charity.
QCDs count toward your required minimum distribution but arent included in your taxable income.
If youre still working for an employer, you could contribute to a 401(k) plan.
Social Security Benefits
Not all Social Security benefits face taxation.
Whether your benefits get taxed depends on your combined income.
Above these thresholds, up to 85% of your benefits may become taxable.
Many retirees dont realize they can strategically manage their other income sources to minimize Social Security taxation.
Planning withdrawals from different retirement accounts can help keep your combined income below key thresholds.
Some states completely exempt pension income, regardless of the source.
Others provide partial exclusions or exempt only certain types of pensions, like those for government ormilitary service.
State tax treatment of IRA withdrawals also varies widely.
For example, Illinoisfully exemptsqualified retirement income.
Check your states tax department website for specific rules that might significantly reduce your state tax bill.
This strategy works particularly well after age 73, when Required Minimum Distributions (RMDs) begin.
The money goes directly to charity, never appearing as income on your tax return.
This non-refundable credit can reduce your tax bill by up to $7,500 for qualifying individuals.
To be eligible, your income must fall below certain thresholds.
Investment income must be below $11,600 to qualify.
Savers Credit
TheSavers Creditrewards low to moderate-income taxpayers for building their retirement savings.
The percentage depends on your income level.
Even seniors working part-time can benefit, making this credit particularly valuable as you approach retirement.
State-Specific Tax Breaks for Seniors
Many states offer some sort oftax break or tax creditfor seniors.
These programs typically have age and income requirements that vary by state and sometimes bycounty or city.
see to it you check your state for potential state-specific tax breaks or credits designed to help seniors.
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