10 tax tips for seniors
Filed under: Tax, Retirement Advice, Tax - Advice
Every year about this time, I receive a lot of mail from seniors who are confused about whether they should file a tax return. The confusion stems from the fact that many seniors receive income from sources that might not be taxable, such as Social Security and tax-exempt bonds. Whether you're a retiree or someone helping a senior family member or friend with taxes, here are 10 tax tips to help ease you through the tax season and maximize your deductions:
- Don't assume that you don't have to file. While it's true that Social Security income is generally not taxable, that's not true in all cases. If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. For more on who must file a tax return, see this prior post.
- Determine how much of your Social Security benefits may be taxable. If part of your Social Security benefits are taxable, how much is taxable depends on the amount of your benefits plus other income. As a general rule, the more income you have, the more likely that some portion of your Social Security benefits will be taxed. To figure this out, you first need to calculate your "base amount." Your base amount is equal to half of your Social Security benefits plus your other income (including tax-exempt interest). If that amount exceeds the limits for your filing status, some portion of your benefits will be taxable. For 2009, the limits are: $25,000 for single, head of household, or qualifying widow(er); $25,000 for married filing separately if you lived apart from your spouse during the year; $32,000 for married filing jointly; and $0 for married filing separately when you lived with your spouse during the year.
- You may be entitled to a higher standard deduction. If you file using the standard deduction, remember that you are entitled to a higher deduction if you and/or your spouse are 65 years old or older. For 2009, that deduction is worth an additional $1,100 per married taxpayer ($1,400 if single or head of household). If you and/or your spouse is blind, you're entitled to an even higher deduction.
- You may qualify for the Making Work Pay Credit. Most retirees don't qualify for the Making Work Pay credit, unless they receive earned income. But if you do work outside of the home, even on a part time basis, you may qualify. To find out, you need to do a few calculations.
- You may qualify for additional tax credits. You may qualify for the Credit for the Elderly or Disabled if you and/or your spouse are at least 65 years or are considered permanently and totally disabled. You must meet certain income qualifications found by completing a "long form" (form 1040 or 1040A). You won't find the credit on the "short form" (form 1040-EZ), so if you think you may qualify, make sure you use the correct form.
- Taking care of grandchildren and other dependents may entitle you to additional tax breaks. In this economy, it's not uncommon to see families living together as bigger units, with the grandparents paying the lion's share of expenses. If you're supporting your family, you may be entitled to claim some of them as dependents, even if one or more of them is not your child. For more information on exemptions and dependents, see this prior post.
- Don't forget about local and state taxes. Many states, such as New Jersey and Pennsylvania, offer additional tax credits, tax breaks, property tax and rental rebates, and tax freezes for seniors. In some cases, these tax breaks are refundable, which means you may be entitled to money back even if you don't owe any tax.
- Be aware that a lot has changed. The Tax Code is constantly changing, and these changes may affect you. In fact, a significant percentage of changes to the Code in recent years involve retirement accounts and tax credits. A great example is the new conversion rule for Roth IRAs: It's only in effect for 2010. Some great resources for tracking changes that affect you include WalletPop and the AARP Web site.
- Get free help. In addition to many community groups that offer free tax services for seniors, the IRS administers programs that provide free help. Consider using the Tax Counseling for the Elderly (TCE) program, which provides free tax help to people 60 and older. TCE programs rely on volunteers, which means the level of returns that can be prepared is generally basic. For more information on TCE, call the IRS at 1-800-829-1040. As part of the TCE Program, AARP offers the Tax-Aide counseling program at more than 7,000 sites nationwide. Tax-Aide is the nation's largest free, volunteer tax assistance and preparation service. It's available to low- and moderate-income taxpayers over the age of 60. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's Web site.
- Get your money back faster. Don't be afraid of e-filing or direct deposit. If you e-file (generally available at the free sites mentioned in #9) and use direct deposit, you will usually receive your refund within two weeks of filing. In most cases, these services should not cost you more money unless you use a paid preparer. Always ask about fees upfront when using a paid preparer so there are no surprises.
MoreOli Scarff, Getty Images
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Reader Comments (Page 1 of 2)
2-05-2010 @ 10:35AM
roisale early said...
I am retired person 73 years I file with my husband..we replaced windows in our house in 2009... do i get back some of that money? thankyou
Reply
2-10-2010 @ 11:22AM
Roberta Jezeski said...
Hi Rosale;
The energy credit is a non-refundable credit. Meaning it can be used to reduce your Gross tax, thus increasing your refund, but if you had no gross income tax, there is no benefit in filing the form.
2-07-2010 @ 1:55AM
Nancy said...
What gets me is supposedly the taxes were not going to be raised "one dime" on anyone making less than $250,000 per year, yet I just got notice from my pension system that my check would be $19 less per month, due to an increase in the federal tax tables. Yet, I got no cost of living increase on my pension, nor did my husband get one on his social security. Our joint gross income is much less than $50,000 So, essentially my taxes have gone up by $250. Thanks for the lie Mr. Obama!
Reply
2-10-2010 @ 6:49AM
Gilda said...
I am 63 and still working and you are correct. My withholding tax has gone up by $18 a month and I am still making the same amount this year that I made last year. Hey guys, Mr Wilson was right on when he called Obama a lier!!!
2-10-2010 @ 1:58PM
Bill said...
I'm not a Obama fan but the reason your withholding went up is the LACK of the tax cut for the 09 stimulus.
2-10-2010 @ 2:08PM
Charlie said...
Just because your deduction went up, it does not mean that you are going bto pay higher taxes; You may just end up with a larger return.
2-10-2010 @ 4:22PM
Dallas said...
You are pathetic!
2-10-2010 @ 10:26AM
Chas said...
These are not tax "increases" you are seeing. The "increase" is just the return to the tax table that was in place when Bush 2 was in office- an expiration of a TEMPORARY reduction in taxes. A majority of elected representatives chose NOT to continue the reduced taxation. And no increases will be sought for the near future because of inflation. Taxes are normally increased periodically according to the economy.
Reply
2-10-2010 @ 1:56PM
Karl said...
This is still a tax increase. Hiding behind the fact the Democrats supported it does not make it anything different. Lower taxes, smaller federal government, no socialism. Support the tenth Amendment.
2-10-2010 @ 11:05AM
bercola said...
Obama is buying off large company (with our money) to run after he leaves the white house.
He will declare himself CEO of GM,citybank, aig, Chase ect ect.
Or even better, follow his friend HUGO and stay as President for life.
The hell with us ,,,,,,,,,,,,,,,,,,
Reply
2-10-2010 @ 11:16AM
Patriot said...
So you think Obama's gonna do the same thing the Bush Administration did -- guess what -- they took all the money and fed it to their conglomerate of businesses. Where has your head been under a rock?
2-10-2010 @ 8:50PM
sonja said...
Obummer is pulling off one of the largest PONZI SCHEMES ever in history right before our very eyes. WAKE UP YOU PEOPLE THAT VOTED FOR THE SCUMBAG CORRUPT CHICAGO THUG, WAKE UP BEFORE IT IS TOO LATE FOR OUR COUNTRY.
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2-10-2010 @ 12:17PM
Patriot said...
Comment # 8 was not made by me(Patriot). Hey scumbag ,get your own screen name. Where are you AOL ? Is this one of your liberal bedwetting buddies????
Reply
2-10-2010 @ 1:06PM
ROBERT OKANE said...
You work all your life for a company, then retire and start collecting social security. While you were working, you paid into social security and the money that was taken from your pay you paid income tax on and it was not a tax deduction on your income tax return. While you were paying into SS, your employer had to match what you paid to SS and that was money paid to SS under your name by your employer was not taxed at the time. Then you retire and collect SS and the Federal Govt collects up to 85% of your SS income even though you had already paid income tax on half that money while your were working and paying into SS fund. That is double taxation. It is not legal, but the Govt still does it anyway. If at the same time for all the years you worked, you take part of your taxed income and just put it into a regular savings account. Then you retire and start taking out money each month. Since that money was already taxed, you do not have to pay income tax on it,and any portion or that money that may be interest earned, you likewise do not pay tax on it if you paid tax on it every year the interest was earned. Seniors are paying hundreds of millions to the IRS on income that was taxed a one time, double taxation. Seniors should only pay income tax on portion of money their employer paid into SS under their name.
Reply
2-10-2010 @ 1:31PM
earl pearsall said...
i am retired, i get my pension and soc sec, and both are tax but when i make donotions to my curch i cant claim and this according to aarp they do my taxes why is this, thanh you in advance
Reply
2-10-2010 @ 1:57PM
Sandra said...
The goverment tells us they lowered our taxes being taken out of our checks, but they hit you at the end. I have never had to pay taxes, we always got a refund. I had to get a second job last year, no federal taxes taken out on this job. I know owe the IRS $1190, if I take the second income out, I owe $69. I have extra $10 taken out on my main job, still was not enough. Now I have $20 taken out of both jobs. The tables showed me owing no taxes for each paycheck, but at the end of the year, I now owe $1121 for income of $7000+ from the second job. Most people would rather pay it threw out the year. who can come up with $1190. I think I will take $1190 \ 26 paydays, pay the IRS $91.52 a month, that what should have been taken out of my check!!
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2-10-2010 @ 3:40PM
'CAL' said...
I MUST AGREE WITH ROBERT HERE ~
MY HUSBAND WORKED UNTIL RETIREMENT WITH THE 'REGULAR' TAXES BEING TAKEN OUT; PLUS, HE ALSO PUT INTO A SAVINGS / INVESTMENT ACCOUNT DURING HIS WORKING YEARS.
NOW THAT HE IS RELYING ON THIS SAVINGS / INVESTMENT MONIES, TAXES AGAIN ARE BEING PAID TO OUR I.R.S. I CERTAINLY FEEL THAT HE HAS ALREADY PAID OUT HIS TAXES WHEN HE FIRST EARNED THIS MONEY AS IT WAS BASED ON HIS TOTAL INCOME. NOW AGAIN, HE IS BEING TAXED ON MONIES THAT HE HAS ALREADY PAID TAXES ON. WHAT GOES ON HERE??
Reply
2-10-2010 @ 2:57PM
CK said...
We are in a period of "let's pretend" economic policy. Let's pretend that tax increases on business and investors will not be passed along as higher prices on everything we buy, use and need. Let's pretend that raising taxes on business and investors will not cut hiring and drive business out of the country. "Let's pretend" works on some voters. Are you one of them?
Reply
2-11-2010 @ 12:10AM
gs said...
if you take a second job and have no tax withheld how do you expect to not owe? - a second job will usually get you a big tax bill
Reply
2-10-2010 @ 3:00PM
Sandy said...
I have read many of the comments from senior citizens about how the U.S. government, the government they supported for
many years, has now abandoned them. It really makes me angry and I would like to turn the president and Congress out of office and out of work. If we all poll together we can do this. It is called voting. We can and will take our government back and
restore our pride in our country. LET"S DO IT!
Reply