There are many benefits to being a senior citizen; however, one of the most overlooked perks is the tax deductions and what they can do for your wallet. You need time to enjoy your golden years because they are finite. So, the taxes you save on can make it possible to cover that vacation home or finance a brand new car without worry.
When you come to tax time, there are several deductions that seniors can take advantage of. Most people do not realize that they can deduct the following:
1. Cost paid to manage your home
This is usually only a $250 deduction or so. The expenses may include pest control, lawn care, cleaning up after pets, and even some pet food. You should know that the IRS considers this an allowable deduction but make sure you know what can and can't be claimed.
2. Medicare or Medicaid premiums
Anyone who receives these benefits will see that their premiums are deducted from their Social Security checks. The IRS has allowed seniors to deduct their premiums from their taxes. The great thing about this deduction is that it does not matter whether you have full coverage or pay for some out-of-pocket costs.
3. Your investment Income
Investment income can be a great way to make money on the side. The only problem is that not all of that money goes into your pocket because you must pay taxes on it if it's over a certain amount. The great news is that there is a lot of wiggle room about the limits on your deductions. A tax professional can help you ensure you are claiming all the deductions you can to limit the taxes paid on investment income.
4. Medical Expense Deduction
Most people know that they can deduct some of the medical expenses they paid over the year. The good news is that you do not have to itemize your tax return to take advantage of this deduction. You can deduct your co-payments, any medical supplies you bought, and even some home modifications. You can add all of these up and deduct them from your taxes.
5. Deduct Your Contributions
If you have contributed to an IRA or other retirement account, you have many options when it comes to deductions. You can deduct the part that was not taxed in the first place, but there is more. You can also deduct any contributions you made during the tax year and then take a deduction for any earnings that grow on that money. It is also possible to take advantage of the deduction if you contribute to a retirement plan, but it will have to meet the requirements.
6. Deduct gambling losses
While some seniors do not gamble, those that do can take advantage of this tax break. You must report the number of your winnings and then deduct the losses. The good news is that there is no cap on how much you can deduct.
7. Moving Expense
Moving into or away from an assisted living facility can cost you thousands of dollars. To take advantage of this tax deduction, you must move to become closer to a relative who has lived with you for at least one year, and it must be their primary residence.
8. Expenses From Your Estate
Many seniors move into assisted living facilities because they want to leave everything to their families. The problem is that it can be a financial burden for the family members to care for them. This is where some of the taxes from the estate can help out. However, the tax rules are always changing, so you should check with a tax professional if you have any questions about this deduction.
In conclusion, there is a lot you can do to make sure you are taking full advantage of the tax breaks that have been put into place for seniors. Deductions that may not seem important on the surface can help make your finances as simple and easy as possible.
Disclaimer: This article is for informational purposes only and is not intended to be a substitute for professional consultation or advice related to your health or finances. No reference to an identifiable individual or company is intended as an endorsement thereof. Some or all of this article may have been generated using artificial intelligence, and it may contain certain inaccuracies or unreliable information. Readers should not rely on this article for information and should consult with professionals for personal advice.