Taxpayers who are 65 or older have a unique tax situation. A number of things change for you, including your eligibility requirements and standard deduction amounts. You may also be reporting retirement income for the first time or accounting for Social Security benefits. Below are the answers to some frequently asked tax questions specific to senior citizens.
Are senior citizens required to file taxes?
As with any age, it depends on your filing status and income. It’s best to confirm if you are required to file on the IRS website – income thresholds often vary year to year.
What is the best tax preparation option for senior citizens?
It’s important to find a program that fits your budget and makes you feel confident that your taxes are done correctly. TaxSlayer is an online tax filing program that is straightforward and guaranteed to be accurate – all for a fraction of the cost of the competition.
All of TaxSlayer’s options include free phone and email support if you need extra assistance. You will be guided through the entire tax return. All you have to do is have your tax documents on hand to answer some questions and enter your information. Then, you’ll submit your completed return and wait for the IRS to accept it.
TaxSlayer can be used for every tax situation. It is easy to understand and has simple step-by-step instructions for filling out your return. TaxSlayer will find all possible credits and deductions for you based on your answers. Plus, you can enjoy zero out-of-pocket fees, guaranteed maximum refund, and 100% accuracy guaranteed.
How are my Social Security benefits taxed?
Single tax filers receiving Social Security benefits with $25,000 to $34,000 in combined gross income (from all sources), may have to pay income tax on up to 50% of their benefits. Single filers with more than $34,000 in combined gross income may have to pay taxes on up to 85% of their benefits.
Married filers fall under the same structure as above, but the income range is $32,000 to $44,000 that is subject to up to 50% being taxed. And those with combined gross income over $44,000 may have up to 85% of benefits being taxable.
Are there special tax breaks for senior citizens?
Yes, the Schedule R Tax Credit for the Elderly or Disabled allows some 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 eligible.
Major life events that could impact your taxes if you are 65 and older
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 an adoption tax credit.
Caring for a grandchild
If you are legally responsible for a grandchild, you may be able to take the Child Tax Credit. There are additional credits and deductions that provide relief for those who care for children, including education tax breaks and credits for child care.
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.
The article was last updated on 4/19/2022.