The IRS gives seniors over 65 a break by offering several lucrative tax deductions. Whether you’re retired or still earning income, taking advantage of these deductions could help cushion your later years. At Kondler & Associates, CPAs, we want to ensure you know all your options.
Here are seven tax deductions for seniors.
The IRS gives seniors over 65 a break by offering several tax deductions. Taking advantage of these deductions could help cushion your later years.
1. Additional Standard Deduction
Seniors are eligible for an additional standard deduction. For taxpayers filing for 2023, this deduction applies to those born before Jan. 2, 1959. Single seniors and heads of households can claim an additional standard deduction of $1,850, while married persons can claim an additional $1,500 each. This is on top of the existing standard deduction.
For blind seniors, the extra standard deduction increases to:
$3,700 for singles and heads of households
$3,000 per qualifying person if you’re married.
2. Medical Expenses Deduction
Seniors can deduct medical expenses that exceed 7.5% of their adjusted gross income (AGI). Eligible expenses include health insurance premiums, qualified long-term care services, and prescription medication costs.
If you have chronic or extensive healthcare needs, this deduction could make a noticeable difference in your finances. However, remember that this deduction only applies to expenses not covered by insurance, and you must itemize your deductions to claim it.
3. Different Filing Threshold
Seniors 65 years and older have a different filing threshold than younger taxpayers unless they work for themselves. The threshold is $14,050 for singles and $27,400 for married couples overfiling jointly.
Spouses who file separate tax returns have a $5 filing threshold, while those who are self-employed need to file a tax if they earn more than $400.
4. Credit for the Elderly or Disabled
The tax credit for the elderly or disabled is actually a credit rather than a deduction, but the result is still that you’ll owe less money to the IRS. The credit is worth up to $7,500.
To be eligible, you must meet specific criteria:
- Over 65 years of age
- Permanently retired on disability and receiving taxable income.
There are also strict income limits that change every year. For tax year 2023, singles need to make less than $17,500, while married couples over 65 who file jointly have a $25,000 limit.
5. Estate and Gift Tax Exclusion
If you’re a senior with significant assets, consider gifting your heirs during your lifetime. The strategy eases your tax burden while also aiding those you care about.
In 2023, you can gift up to $17,000 per person or $34,000 if married tax-free. The lifetime estate exclusion is also substantial at $12.92 million for individuals. The yearly limit will rise to $18,000 in 2024, while the lifetime limit will increase to $13.61 million.
If you want to give more than $17,000 in a year, you can still do it tax-free. For example, if you gifted your grandson $30,000 in 2023, the excess $13,000 would count against your lifetime exclusion amount.
6. Local and State
Local and state governments routinely implement tax breaks for seniors. There’s no guarantee that your area has options, but it’s worth looking into.
These programs typically have strict age and income requirements yet are often more relaxed than federal variations. For instance, many jurisdictions offer tax help if you’re 62 or older instead of 65.
Seniors may be able to access local or state tax breaks on property, income, and sales taxes. The team at Kondler & Associates can help you determine what’s possible in your area.
7. Retirement Savings Contributions
If you’re still working and contributing to a retirement account, those contributions might be tax-deductible up to a certain amount. In 2023, the contribution limits for traditional IRAs are $7,500 if you’re over 50.
Your income and filing status influence how much you can deduct. If your spouse also has retirement accounts, the deduction limits could change. For instance, if one spouse isn’t covered by a work-sponsored plan but the other is, contribution deductions might be reduced or disallowed.
Seniors have many tax deductions available to them that can significantly reduce their tax bill. At Kondler & Associates, CPAs, we specialize in helping seniors maximize their deductions and minimize their taxes.
Contact us today to learn more about how we can help you take advantage of these lucrative tax deductions for seniors in 2023. Remember, the deadline for filing your taxes is April 15th, so don’t wait until the last minute! Plan ahead and make sure you’re taking full advantage of all the deductions available to you as a senior.