Tax Breaks Seniors Can’t Afford to Miss
Whether you are a senior or retired, there may be some deductions available to you this year that you weren’t aware of. Deductions on tax returns may differ for those aged 50 and over. If you’ll be filing your taxes soon, you need to know about these deductions in order to maximize your refund. Here are some commonly over-looked deductions for seniors:
Medical and Dental Expenses
For many retired people and seniors, medical expenses can often equal the largest of all expenses each year. Most of your medical expenses, fortunately, are deductible. Insurance premiums, nursing home care, prescription drugs, out-of-pocket health care expenses and Medicare premiums can all be deducted.
You should know, though, that your expenses are only deductible when they reach over 7.5 percent of your adjusted gross income. This means that if you make 50,000 a year, and only spend $500 for medical expenses, you would not qualify for the deduction.
Selling a Home
If you lived in your house for two out of the five years prior to selling it, any profits made are not taxable, up to $250,000 for single filers and $500,000 for joint filers. This means that if you moved to Florida ten years ago, and rented out your previous home prior to selling it, your profits would be taxable.
Contributions to a Retirement Plan
If you have an IRA or a 401(k) that you are contributing to, you may be able to deduct your contributions from your returns. If you are over 50, and filing jointly, you can contribute up to $12,000 and deduct that amount. If you are under 50, and filing jointly, you can contribute up to $10,000.
There are many rules when it comes to deducting contributions to charity. For instance, if you donate cash to an organization, you can deduct only the amount that is up to 50 percent of your adjusted gross income. If you donate non-cash items, you can deduct the fair market value of the item.
For many people, investing after retirement is not only a hobby, but also a way to maintain a certain standard of living. If you have made investments and incurred fees, you may qualify for deductions when those expenses exceed two percent of your AGI. These expenses include: online service fees, financial planning costs, home computers, safe deposit boxes, attorney fees and accountant fees.
If you’ve retired and have started your own business, you can claim deductions for expenses incurred to do business. Examples include: equipment and supplies, travel expenses and even utilities. If you’ve started your own business and are unsure which expenses are deductible, you may want to seek the advice of a qualified tax attorney.
Retiring can have a drastic effect on the way you file your taxes and the deductions that you qualify for. In the same vein, reaching your senior years can affect your filings and deductions. If you are unsure of what you do or don’t qualify for, meet with an accountant or tax preparer. There’s no sense in missing any deductions that will make your refund grow! Remember: any monies spent on tax preparation can be deducted from next year’s taxes!
Neil Davis is a tax consultant and in his spare time blogs for workingtaxcreditcalculator.co.uk a site which can help you with your tax credits 2012 as well as keep up to date on any changes on working tax credit!
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