Seeking additional tax breaks is a common goal for all working adults, but for seniors in the U.S., it becomes particularly crucial. Living on a fixed monthly income emphasizes the importance of maximizing available funds, especially when every extra cent can make a significant difference. Seniors also need to navigate retirement savings and find ways to pass along monetary funds and assets to family members without encountering additional taxes. Luckily, there are specific tax breaks tailored for seniors that can contribute to financial well-being. Before consulting with a tax expert, consider utilizing “tax return websites free” for cost-saving filing options. Here are four tax deductions every senior should be aware of and leverage for their next filing:
- Opt for a Larger Standard Deduction: When filing taxes, individuals can choose between the standard deduction and the itemized deduction method. Following the Tax Cuts and Jobs Acts of 2017, standard deductions have increased, providing a predetermined amount set by the IRS. Opting for standard deductions not only reduces paperwork but also ensures larger returns compared to most itemized deductions. This can be particularly advantageous for seniors with fixed incomes, streamlining the filing process and resulting in a healthy return.
- Gift Money to Family: Seniors can gift money to their family up to nearly 11.6 million in their lifetime without incurring taxes. Recipients of monetary gifts do not need to declare them on their taxes. Even estates can be classified as gifts if they fall below a certain threshold. These IRS regulations offer various options for seniors to provide for their loved ones and pass down assets. Gifting money to family, within IRS limits, presents an excellent tax break. Seek guidance from professional services like H&R Block Taxes for comprehensive information on IRS limitations.
- Leverage Spousal IRA Contributions: Spousal IRA plans enable the opening of an account for a non-working spouse without coverage from an employer retirement plan. For married couples with combined income below $103,000, a full deduction of spousal IRA contributions is possible, provided one spouse is working and covered by an employer retirement plan. This allows seniors to accumulate savings without additional taxation, offering a valuable financial strategy.
- Deduct Medicare Premiums: A lesser-known tax break for seniors involves deducting Medicare premiums. Self-employed older adults can deduct all Medicare premiums, including those for spouses. This deduction covers Medicare Part B, Part A, Medigap, Advantage plans, and Part D. Considering that many seniors are self-employed, taking advantage of this deduction can lead to significant tax savings. Before filing, consult with professional services such as TurboTax to ensure familiarity with this deduction.
Understanding and utilizing these tax deductions can empower seniors to navigate their finances more effectively and make the most of available benefits during tax season.