Tax season can be daunting, especially during retirement years when your filings likely look very different from what you’ve become accustomed to throughout your career. With the tax filing deadline less than one month away, we at HCG Secure want to ensure you’re taking advantage of deductions and credits available to retirees.
For those over age 65, the standard deduction increases from 2021. For the 2022 tax year, the standard deduction for spouses filing jointly and widows is $25,900, and $14,700 for those filing as singles. Taking the standard deduction can be a good way to simplify your taxes and avoid the need for itemization. For the 2023 tax year, spouses will see an increase of $1,800 for the standard deduction.
Do I need to file income taxes in retirement? Most single taxpayers under the age of 65 must file taxes on income exceeding $12,400. Those over 65, however, file taxes on income (including social security benefits) exceeding $14,500, or $27,400 for joint filings.
You may not have to file your taxes this year if Social Security is the majority or all your annual income! For singles and those filing independently with total benefits less than $25,000, you likely do not need to pay federal income taxes on those Social Security checks. And, if you receive between $25,000 and $34,000 annually, you’ll only pay federal taxes on half of those benefits. For those filing jointly, the threshold for paying taxes on Social Security income is $32,000 and you’ll pay taxes on just half of those benefits if you earn between $32,000 and $44,000. And, for those on Social Security and exceeding these thresholds, you’ll still only pay federal income tax on 85% of your total earnings.
Most medical expenses are deductible! If you choose to itemize your filings, rather than taking the standard deduction, be sure to get your medical bills organized for deductions. Health insurance premiums, mental health care, dental and vision care, prescription drug costs, and medical expenses exceeding 7.5% of your income are all deductible expenses. Check out our last blog post on tax deductions for durable medical equipment!
The IRS offers an additional tax credit for seniors and those living with disabilities. Unlike deductions, this credit is not tied to annual income; These credits can exceed the total amount you owe to the IRS, in which case you may see a refund! Check out AARP’s resources, FindLaw.com and the IRS Publication 524 to assess your eligibility and work with an accountant if you believe you are eligible for a credit.
As you’re filing your 2022 taxes, make sure you’re taking full advantage of the unique deductions the IRS offers seniors during tax season. These tax savings can be put to good use, in the form of coverage for your extended care needs. With most retirees needing long-term care services and supports, start saving money now, whether for insurance or out-of pocket costs, so you can receive value-aligned care as you age. Work with an accountant or financial professional when possible, and find more relevant information and supports at IRS.gov.