Courtesy of Tom Ploskonka—
When it comes to taxes, growing older has its advantages. Here are some of the tax breaks available as you reach a certain age.
• Higher standard deductions. You’re eligible for a higher standard deduction once you reach age 65. On your 2012 tax return, you can claim an extra $1,450 deduction if you’re single. If you and your spouse are both 65 or older, your combined extra deduction is $2,300.
• Tax credit for the elderly. You may qualify for this direct credit against taxes if you’re age 65 or older during the tax year. There are limitations if your tax-free pension benefits, such as social security, exceed certain levels. Income limitations may also apply.
• Tax breaks for social security benefits. Generally, you’ll pay no tax on social security benefits if the total of one-half of the benefits plus all other income is less than $25,000 (singles) or $32,000 (married filers). Above those levels, you’ll pay tax on up to 50% of your benefits. High-income seniors could be taxed on up to 85% of their social security benefits.
• Possibly escape filing a tax return. Because of the higher standard deductions and potentially tax-free social security benefits, your taxable income may not reach the filing threshold. The filing threshold depends on your filing status. For example, if you’re single and 65 or older, a 2012 return is not required if your income is less than $11,200. A married couple over age 65 doesn’t need to file if income is less than $21,800.
• Higher contributions. Once you reach age 50, you may contribute more to your retirement account – an additional $1,000 to an IRA, $2,500 to a SIMPLE, and $5,500 to a 401(k). At age 55, you can contribute $1,000 extra to a health savings account for 2012.
• Additional breaks on state taxes. Some states offer special breaks on taxes for seniors. Also check whether you qualify for deferral programs or other breaks on your property taxes.
Please contact our office to make sure you’re receiving all the tax breaks for which you qualify at any age.
