When tax season rolls around and you are retired, is it necessary for you to go through the process of filing a tax return? Some people assume that they don’t need to file their taxes if they aren’t working anymore, but it is possible that you are still bringing in taxable money throughout the year.
The best thing that you can do is work with an experienced tax professional who can offer advice for your individual situation. Here are a few things that you need to know about tax filings during retirement:
Social Security Payments Might be Taxable
Is Social Security your only source of income? Then it is not taxable because your gross annual income is zero for tax purposes, so you don’t need to worry about filing a federal return. If you bring in any other source of income, then the social security benefits will need to be added in to see where your income falls on the scale set by the IRS.
The filing limit has been set at $11,850 per year for a senior over the age of 65. If you are married, then the threshold is $23,100 once both spouses are over the age of 65. Keep in mind that there might be other unique situations that require tax filing, so it is essential that you talk with a tax professional about your income status.
Tax Help for Seniors
If you already work with a tax professional, that’s great. If not, some communities have resources to provide free tax advice and services for seniors over the age of 65. In fact, you might be able to find an organization in your local area where you can get free help. Check with your local senior center to see if these types of services are available.
Deducting Medical Expenses
It is common for medical expenses to increase in the later years of life. Even though you are paying more money for medical services, these costs (or a portion of them) could be tax deductible. According to the current tax laws, medical expenses that exceed 7.5% of your gross income can be deducted. Keep track of your medical expenses to see if it makes sense to deduct these expenses or to take the standard deduction. Make sure you consult with a tax professional and ask plenty of questions.
Even though you can write off medical expenses, it is still important that you are proactive to manage insurance costs. Talk with us for more information about the best insurance coverage for retired adults.