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Tax season can be a stressful time for anyone, but seniors juggling fixed incomes and balancing their budgets often find it to be particularly straining. As you prepare your taxes, don’t forget these 5 senior retiree tax breaks that can help reduce your final tax bill.
Medical Expense Deductions
With rising costs of medical care, seniors are among the highest paying patients. The skyrocketing, out-of-pocket expenses are a huge burden for seniors, especially those living on fixed retirement incomes. Fortunately, there’s a tax break in store for those whose medical costs are greater than 10% of their adjusted gross income. Just make sure to keep receipts from medical visits and treatments and file everything together to make use of this tax break.
Profit from A Home Sale
Many seniors choose to sell their homes to move into a smaller property or assisted living community. So long as the individual, or couple, lived in the home for at least two of the five years prior to selling the home, they can claim up to $250,000 each in profit made in the sale. For couples, that’s up to $500,000 in total profit. This is an incredible way to gain access to extra funds without having to pay taxes on the profits made on the sale.
Tax Break on Retirement Contributions and Withdrawals
Regardless of whether you’re still working, semi-retired, or fully retired, you can make tax-deductible contributions toward your retirement accounts, like IRAs and 401(k)s. Senior couples who are at least 50 years old can claim up to $12,000 in retirement contributions on their taxes annually.
On the flip-side, withdrawals from a Roth IRA are completely tax-deductible. This is because taxes are taken on contributions when they are put into the account. Any interest gained on the contributions won’t be taxed when they are taken out.
Charitable Contributions
Many seniors choose causes and organizations that they feel passionate about to contribute to during their retirement years. Thankfully, any charitable cash contributions are tax-deductible, up to 50% worth of your adjusted gross income.
Elderly and Disabled Tax Credits
Disabled and low-income individuals can qualify for a tax credit, a dollar-for-dollar deduction off their final tax bill. This is a rare tax credit, but those who do qualify often see a remarkable difference in their resulting bill. Qualified individuals must be at least 65 by the end of the tax year, or retired on permanent and total disability, with taxable disability income.
Saving money on these tax breaks can be extremely useful for retirees living on a fixed income. If you’re struggling to balance your finances, you might consider selling all or a portion of a life insurance policy that you no longer want or need through a life settlement. Life settlements, also called viatical settlements, allow seniors to sell an underperforming policy for a cash amount that is much larger than the policy’s surrender value. Check out our qualification calculator to see if you qualify today!
Case Study:
Jo Ann has found it more and more difficult to maintain her home since her husband, Bill, passed away. Jo Ann needed to get the roof replaced and she wanted to remodel the kitchen.
Jo Ann discovered she could sell her life insurance policy. She was able to pay for the new roof, remodel the kitchen and have $25,000 left from the sale of her policy.
