March 2, 2020
Reimbursement for medical expenses
Senior status automatically makes you eligible for a potential tax break for health-related costs. Per Nerdwallet’s Tina Orem, you might be able to deduct unreimbursed medical expenses. The only caveat is that the total amount of the expenses must be greater than 10 percent of your adjusted gross income.
A deduction for the elderly or disabled
The IRS also offers something known as the Credit for the Elderly or the Disabled. To qualify for this tax break, you must be 65 years of age or older or retired on permanent and total disability. You must also receive taxable disability income for the tax year you’re requesting the deduction for. Lastly, you must have an adjusted gross income that falls below a certain threshold determined by the IRS.
A tax break on your social security income
Per The Balance’s Beverly Bird, you might not have to pay taxes on your Social Security income. To find out if any of your Social Security income is tax-exempt, the IRS’s website has several handy tools to help you work through the rules. Another option would be to seek the expertise of a tax consultant or financial advisor.
Rewards for downsizing to a smaller house
Retirement is the perfect time to sell a house that’s too large to keep up with in favor of buying a smaller one — and senior tax deductions provide one more reason to do so. If you’re single, the IRS lets you exclude up to $250,000 of capital gains on the sale of your house from your income, as Orem confirms. If you’re married, you can exclude as much as $500,000. Some of the requirements for this deduction are that you must have owned the house for at least two years and the house must have been your primary place of residence.
Property tax deductions
Depending on where you live, certain locations grant seniors a tax break for personally-owned properties. In the U.S., this exemption can take the form of a dollar amount or a certain percentage off your home’s appraised value, as Bird articulates. For instance, if you’re a senior in Alaska, you’re eligible for a $150,000 deduction off your home’s value, at the time of writing. However, if you live in New York, you can write off 50 percent of your home’s value.
These are just some of the many tax deductions you can secure during retirement. Consult with a tax consultant or financial advisor to find out if you qualify so you can start reaping some benefits of this stage of life.