If you felt like your tax bill was a little higher than you would have liked this year, now is a great time to starting planning for next year's taxes. As a senior citizen, you can take certain steps to reduce your taxes for the upcoming tax year. Here are four great tax deductions that you can take advantage of as a senior citizen.
If you are over the age of 65, you actually qualify for a larger standard deduction than individuals who are under the age of 65. For example, during this past tax season, as a married couple filing joint taxes, you could get a standard deduction of between $13,850 - $17,600 depending on the age of you and your spouse and whether you are visually impaired or not. In comparison, a married couple filing jointly who is under the age of 65 only qualify for a standard deduction of $12,600.
If you and your spouse are over the age of 65, make sure that you are claiming the correct standard deduction. If either of you is visually impaired, your standard deduction could be even larger.
Selling Your Home
If you want to sell your home, you may not have to pay a lot of taxes on the profit from your home. If you have lived in your home for two years in the past five years, you may be able to avoid paying capital gains taxes on the profit from your sale.
As a married couple, up to $500,000 in gains can be excluded from your taxes. It is important to note that your gain is not just the profit on your sale from your original purchase price. What is considered your capital gain is based on a combination of your original purchase price, purchasing expenses, capital improvements, selling costs and closing costs.
It is best to work with an experienced tax lawyer or tax professional if you sell your home to make sure that you calculate your gains correctly.
You can keep a little extra money in your pockets depending on where you live by paying reduced property taxes. Many state and local governments offer tax deferrals or tax exemptions for senior citizens, based on your age and income level.
A local tax professional should be able to assist you and let you know if this option is available in your area.
Once you are over 65, it is easier to deduct medical expenses from your taxes. Generally, you can only deduct medical expenses if they are greater than 10% of your adjusted gross income. However, once you are over 65, your medical expenses only have to be greater than 7.5% of your income for you to deduct them from your taxes. As long as either you or your spouse is over 65, you can take advantage of this lower deduction rate for medical expenses.
If you or your spouse is over 65, a tax professional can help you with your new tax responsibilities, including trust tax returns and deductions. There may be multiple ways that you can save on your taxes in the upcoming year.