Knock, knock…it’s Uncle Sam!
Hard to believe it’s tax season already but here we are! If you haven’t made an appointment with your Certified Public Accountant (CPA), now is the time to do so as their schedules book up fast.
Did you know that there are services available to seniors that allow your taxes to be filed for FREE?!
The Tax Counseling for the Elderly (TCE) is a service available to taxpayers and applicants who are 60 years or older and these IRS-certified volunteers will review and file your taxes. These volunteers are well versed on many tax issues regarding pensions and social security in addition to many others. While these are volunteers, it is important to note that these are qualified experts in the field so you can feel peace of mind knowing that not only are your taxes going to get filed correctly but it’s NOT GOING TO COST YOU A DIME! >>>Find a volunteer near you
Know what deductions you may be eligible for
When it comes to both federal and state taxes, seniors are entitled to some additional deductions which is fantastic but very few people know about these deductions. Discuss the following, if you think you qualify, with your CPA at your tax appointment:
- Increased Standard Deduction
From 2022 to 2023, there has been an increase to the standard deductions. Consult with your tax professional to learn what 2023’s standard deductions have increased to.
- Different Filing Threshold
The filing threshold is the income you must earn before being required to file a tax return. Seniors don’t have to file a return until their income exceeds $14,050. Married filers over 65 years of age do not need to file a joint return unless their incomes exceeds $27,400. Again, you should be consulting with your preferred tax accountant or financial advisor to verify all this information, but this is to give you an idea.
- Business and Hobby Deduction
If you are in retirement and have picked up work as a consultant or have a penchant for design and create works of art that you wind up selling as a source of supplemental income, this essentially means that you are self-employed and you will need to pay taxes on this income. Review any sources of supplemental income with your financial representative and let them guide you on how best to go about reporting this on your taxes- you will be eligible to deduct any costs for running your business/creating the inventory you sell and they can walk you through this step-by-step.
- Medical Expense Deduction
Many seniors don’t know this but you can deduct some medical and dental expenses on your taxes. If you or your spouse is legally blind, there are even blindness exemptions that may be available to you if you qualify. In addition, if you or your spouse are receiving home care services, you may even be able to deduct a portion of these costs on your taxes. Speak to your financial advisor to see how you can take advantage of these deductions.
- Elderly or Disabled Tax Credit
This credit is different than a deduction (which comes from your total taxable income) as it allows you to deduct from the total amount owed to the IRS. There are eligibility criteria to qualify for this credit, so it is best to consult with your preferred financial expert. However, the most basic criteria to qualify is that you are over the age of 65 or permanently disabled.
- Charitable Deductions
It feels good to do good and you can get rewarded at tax time as most charitable donations, including both monetary and property donations, are deductible. Speak to your financial planner on how you can maximize your charitable deductions.
- Retirement Plan Contribution Benefits
Retirement plan contributions are often eligible for a saver’s credit that allows you to deduct a portion of the contribution from the amount you owe to the IRS. It is important to note that this is entirely separate from a deduction so seek expert guidance for more information on this saver’s credit.
- Estate and Gift Tax
It is always best to check with your accountant what the limits are for estate transfers and gifts but, in 2023, the Massachusetts estate tax exemption is $1 million (not portable between spouses) and the tax applies to the entire estate- not just the amount above the exemption. The federal estate tax is much higher at $12.92 million and is portable between spouses (meaning that a married couple can protect up to $25.84 million upon the death of both spouses) (learn more). Massachusetts does not have its own gift tax so, when it comes to gifts, the federal gift tax exemption is applied which is $17,000 in 2023. Be cautious, however, when it comes to estate transfers and gifts if you are in the midst of applying for Medicaid/MA Health or think you may apply in the near future. Medicaid/MA Health has a 5-year look-back period whereby any estate transfers made or gifts given within the past 5 years of the time the application is received will be counted towards your “assets” and this could impact you from being approved for Medicaid/MA Health. It cannot be stressed enough- the best thing you can do is seek professional guidance from both a CPA or financial advisor as well as an Elder Law Attorney who specializes in Medicaid Planning to ensure that the right instruments are in place to protect you.
- State Senior Tax Exemptions
Many states offer specific tax benefits to seniors, and it is common for states to not tax Social Security earnings. For Massachusetts residents, taxpayers are allowed a $700 exemption if the individual is 65 or older before the end of the year. For married couples filing a joint return, each spouse may be entitled to one exemption is each is 65 years of age or older on December 31 of the tax year.
For more senior tax tips, click here to access the Commonwealth of Massachusetts’ Department of Revenue information packet.
Need your taxes done but don’t have a preferred CPA? No problem!
ABC Home Healthcare Professionals is proud to partner with some incredible experts who are available to help our clients get the financial help they need. Contact ABC’s Michelle McNall for a list of recommended professionals!