Tax Benefits Available as You Age
Finding any helpful reason to pull down your tax liabilities is a welcomed benefit, no matter one’s age. But, once you move into your golden years, exploring new tax benefits is worth the time and effort—you may have specific tax benefits available to you that you couldn’t previously claim. And any money you save today can help you fund a long and comfortable retirement.
To help you plan ahead, here are three tax benefits to consider:
1. Claim Expenses for Medical and Dental Care
If you had medical or dental services provided and weren’t reimbursed for your expenses, you may be able to claim these costs when filing your taxes. You can do so when the medical costs are a specific percentage of your adjusted gross income (AGI), and the amounts vary by your age:
• Born before January 2, 1952: Medical expenses must be at least 7.5% of AGI
• Born after January 2, 1952: Medical expenses must be at least 10% of AGI
Deductions are available for medical or dental expenses related to a diagnosis, prevention, treatment, cure, or relief. Additional costs you can deduct include:
• Transportation expenses necessary for your medical care
• Payments you made to qualified long-term care insurance
• Unreimbursed expenses for long-term care1
2. Claim Credit for the Elderly and People With Disabilities
If you are over 65 years old⎯or retired before turning 65 with a disability⎯you can claim a tax credit. You must meet two specific criteria:
• You are a qualifying person: At the minimum, you must be a U.S. citizen or a legal resident. You typically can’t take the credit if you spent part of the year as a non-legal resident.
• You are within the approved income limits: Certain income limits apply in order to be eligible for the credit. The details vary according to your marital status, your adjusted gross income amounts, and any disability income and nontaxable social security, pensions, annuities.
A variety of details will affect whether or not you qualify within these two criteria, and you can learn more on the IRS website.2
3. Make Catch-Up Contributions
One perk of turning 50 is the ability to make catch-up contributions to your retirement accounts. These can be helpful if you still need to save more retirement savings, and you can do so while gaining a tax deduction in the process. However, you cannot apply the deductions on Roth accounts, since you pay into those with after-tax money.
You can make the following catch-up contributions in a given tax year:
• SIMPLE Plans: $3,000
• 401(k) & 403(b) Accounts: $6,000
• Traditional & Roth IRAs: $1,000
If you would like to explore the tax benefits available to you, we’re happy to talk.
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