Tax Credits and Savings for Seniors

If you are age 65 or older, there is good tax news for you!

Depending on your income and filing status, you may be eligible for a tax credit ranging from $3,750 to $7,500. The tax credit will directly reduce your tax bill. For example, if you owe $4,500 in taxes and receive a tax credit of $4,000, your new tax bill is reduced to $500!

However, please note that if the tax credit you receive is more than the amount you owe, you will not receive a check for the difference (but you also will not owe any taxes.) For example, if you owe $4,500 in taxes and receive a tax credit of $5,000, you will not have to pay any taxes (but you will not receive an additional $500.)

How do you qualify for a tax credit?

1.    You must be a U.S. citizen or a resident alien. You may qualify if you are a nonresident alien married to a U.S. citizen.

2.    You must be 65 years of age or older by the end of the tax year.

3.    You must meet the income requirements.

What are the income requirements?

If you do not meet both of the qualifications based on your filing status, you are not eligible for a tax credit.

Single Filing Status

If you are a single filer, your adjusted gross income (AGI) cannot be over $17,500. In addition, the total of your nontaxable social security benefits and other nontaxable pensions cannot be over $5,000. If you do not meet both of these qualifications, you are not eligible for a tax credit.

Married Filing Status

If you are married filing jointly and only one spouse qualifies for the credit, the AGI must be less than $20,000 and the nontaxable social security and other nontaxable income must be less than $5,000.

If you are married filing jointly and both spouses qualify for the credit, the AGI must be less than $25,000 and the nontaxable social security benefits and other nontaxable income must be less than $7,500.

If you are married filing separately OR if you’ve lived apart from your spouse for the entire tax year, the AGI must be less than $12,500 and the nontaxable social security benefits and other nontaxable income must be less than $3,750.

How can I confirm if I qualify or not?

The IRS Online Tool can be used to help determine if you qualify for the senior tax credit. The link provides the information you need and says that it will take approximately five minutes of your time.

What are the additional methods of tax savings for seniors?

            Larger Standard Deduction

When you turn 65, you are able to take an additional standard deduction.

If you are a single filer, you can add $1,650 to the standard deduction for which you are eligible.

If you are married filing jointly, you can add $1,300 for each spouse who is 65 years or older.

Higher Filing Threshold

If you are 65 years of age or older, you can earn more money before you have to file a tax return.

If you are a single filer under age 65, you have to file a tax return if you earn more than $12,000. However, if you are over age 65, you don’t have to file a tax return unless you earn more than $13,600.

If you are married filing jointly and both you and your spouse are under age 65, you have to file a tax return if you earn more than $24,000 collectively. If one spouse is over age 65, a tax return must be filed if you earn more than $25,300 collectively. If both spouses are over age 65, you don’t have to file a tax return unless you collectively earn more than $26,600.

Taxes on Social Security May be Waived

Determining if you are taxed on your social security is based on your income, taxable retirement funds, tax-exempt interest, and what you collected in social security benefits. The IRS offers an Online Tool for Social Security Taxes to help ascertain the taxes paid or waived on social security.

Contact Us!

We are always here to help with any of your tax questions and want to make sure that you reap the benefits of any allowed tax savings! Please contact us so that you don’t miss out on claiming your tax credit!