When you reach the status of senior citizen, you might be wondering how it will change your tax situation. Or if your new Social Security benefits will be taxed. We answer these questions and more in this article.
Which senior citizens are required to file taxes?
Many senior citizens do need to file taxes. If you meet any of the filing status and income requirements below, you will need to file.
|Filing Status||Total income (Under 65)||Total income (65 or older)|
|Married Filing Jointly||$20,800 (both spouses)||$22,050 (one spouse) $23,300 (both spouses)|
|Head of Household||$13,400||$14,950|
|Married Filing Separately||$4,050||$4,050|
How will my Social Security benefits be taxed?
If you receive Social Security benefits, you will not typically include this in your gross income. If these benefits are your only income and the total amount is less than $25,000 or $32,000 if you are married filing jointly, then your gross income is zero and you are not required to file. If the amount exceeds these limits, then a portion will be taxed.
If you receive these benefits and additional non-exempt income, you will need to file if you meet the income amounts listed in the chart.
If your filing status is Married filing separately and live with your spouse, you may need to include your benefits in your gross income.
How much is the standard deduction for seniors?
The 2019 standard deduction amounts are listed below.
|Filing Status||Standard Deduction|
|Head of Household||$18,350|
|Married Filing Separately||$12,200|
|Married Filing Jointly||$24,400|
The standard deduction is higher for most senior citizens. If you are married filing jointly, add $1,300 to the standard deduction for each spouse who is 65 or older. If both spouses are 65 or older, you can increase your standard deduction by $2,600. If you are filing single or head of household, you can increase your standard deduction by $1,650. You must be 65 on the last day of the tax year to take this additional deduction.
If you are legally blind, you can take an additional deduction. If you or your spouse is legally blind, you can also add $1,300 to your standard deduction. If you are both legally blind, you may deduct an additional $2,600. If you are legally blind and unmarried, you can deduct an additional $1,650.
How do life events affect senior citizens’ tax situation?
If you are retired, you may experience additional tax breaks. The following retirement income is tax-free:
- Roth IRA withdrawals (if you meet the requirements)
- Gains from the sale of your home
- Loans from life insurance policies
- Any after-tax contributions, like an after-tax 401(k) contribution
However, not all withdrawals will be tax free. The following sources of retirement income are taxable:
- Withdrawals from pretax retirement plans (IRA, 401(k), SEPs, etc.)
- Withdrawals from an annuity
- Pension income
- Social Security (up to 85% depending on the situation)
- Cash-value life insurance policy
If you adopt a child, you could get a credit worth up to $14,080 per child.
Caring for a grandchild
If you are legally responsible for a grandchild, you may be able to take the Child Tax Credit which is worth $2,000 per qualifying child. There are additional credits and deductions that provide relief for those who care for children, including education tax breaks and credits for child care. Learn more about how children can help reduce your tax liability here.
Selling a home
If you sell your primary home for a capital gain, you may be able to exclude a portion of the sale from your tax return. Section 121 allows you to exclude up to $250,000 ($500,000 if you are filing joint) on your return. Learn more about capital gains on the sale of your home here.
Are there any special tax breaks for senior citizens?
Yes, the Schedule R Tax Credit for the Elderly or Disabled allows individuals and couples to take a special tax credit. You can only take a credit equal to the amount of income tax due, even if you qualify for a large amount.
To qualify, you must be either elderly (age 65 or older) or disabled. To meet the disability requirement, you must:
- Be permanently disabled before you retire
- Receive disability income during the tax year
- Be younger than your employer’s mandatory retirement age
Please note: you cannot claim this credit if your filing status is married filing separately.
TaxSlayer will help you fill out the Schedule R and automatically calculate your credit for you if you are qualified.
How did tax reform impact senior citizens?
Larger standard deduction
The Tax Cuts and Jobs Act increased the standard deduction for all taxpayers. The amounts for tax year 2019 are as follows:
|Filing Status||2018 (taxes filed in 2019)||2019 (taxes filed in 2020)|
|Married Filing Separately||$12,000||$12,200|
|Married Filing Jointly (and Qualifying Widow/ers with Dependent)||$24,000||$24,400|
|Head of Household||$18,000||$18,350|
New simplified 1040 for 2019
There is a new tax form for seniors: Form 1040-SR. The Tax Cuts and Jobs Act removed Form 1040-EZ, but this new form is a simpler 1040 aimed at helping seniors file their taxes faster. Anyone who turns 65 during the tax year can use this form as long as they plan to take the standard deduction. This form uses a larger font so it is easier to read, and a chart to help the taxpayer quickly calculate their standard deduction. Taxpayers will be able to file this form online with software like TaxSlayer. See what this new form looks like here.
If you did not have health insurance for the majority of the tax year, you paid a penalty on your return for tax year 2018 and prior. However, the Tax Cuts and Jobs Act eliminated the Shared Responsibility Payment in 2019.
What is the best tax preparation option for senior citizens?
TaxSlayer can help you take all the benefits mentioned in this article. You can choose to be guided through your return. TaxSlayer will recommend credits and deductions to you based on your answers. Plus, you can enjoy zero out-of-pocket fees, guaranteed maximum refund, and 100% accuracy guaranteed. Learn more at TaxSlayer.com.