Income Tax – Are you a Senior Citizen?

Senior citizen often face tax issues as they are retired and don’t get enough money to fulfill all their wishes and top of all they need to pay taxes on their little income. However, as a senior citizen, you can save a lot of tax money if you’ve a little knowledge about tax rules and laws. You should also keep yourself update with the recent changes that are taking place in the tax laws. IRS has provided several tax relief options to the senior citizens, if you them wisely handsome amount of money will there in your kitty. There are some benefits for which you’d need to pay taxes.

Social security benefits are one of the oldest benefits provided to the senior citizens by the government. Originally, there were no taxes on social security benefits. However, now if you’re getting benefit from your social security, the money will be considered as taxable income. You’d need to pay taxes on your social security benefits just like income tax. The percentage of tax varies from case to case. It could be as high as 80% and sometimes, you don’t need to pay even a single cent. The calculation of taxes mainly depends on your income level.

One of the credits that can be enjoyed by the senior citizens struggling with their taxes is elderly or disabled credit. The exact amount is quite tough to calculate because it entirely depends upon the individual’s financial situation. In order to qualify for elderly or disabled credit, you’d need to be over 65 years of age at the completion of the tax year or you’d need to qualify for some specifications so that IRS considered you as disable. Senior citizens also get deductions on their medical expenses. However, there is a professional way to get the deductions. You’d need to itemize your deductions in order to get deduction on medical expenses. However, you can claim medical expenses only if they exceed 7.5% of your adjusted gross income. Therefore, keeping track of your medical expenses all through the year is a good practice.

Higher standard deduction is also very beneficial for senior citizens. The deduction is also valid for people who are blind or have gone blind before the end of the year. However, with this deduction, you’ll not get benefit of other options such as Medical expense because for higher standard deduction, you cannot itemize your return. A new benefit introduced by the IRS especially for senior citizens is “Roth IRA benefits.” Roth IRA is tax free unlike traditional IRAs. Best feature of this benefit is that you can convert your traditional IRA to Roth IRA and the process is known as Roth conversion.

Lot of senior citizens spend their retiree money in gambling to earn more money. If you don’t want to get into any kind of issue with the IRS, you should pay taxes on your winnings and your every win is taxable even if you lose you next deal by big difference. The tax laws are constantly changing; therefore, seeking tax professional’s help becomes must!