With tax season here, if you are a senior, you may be trying to figure out how you can save on your taxes and avoid having to pay large amounts to the IRS. This is especially true if you are retired, have no dependents in your home, and have even already paid off your mortgage. Continue reading more to learn more about five tax credits that you can earn if you are a senior from claiming the deductions that are listed:
1. Give money to charity
You can give money to a favorite charity organization or loved ones fundraising for registered charities each year and deduct that amount from your taxes. This is a win-win as the money you donate will truly benefit those charitable causes and you end up getting a nice tax deduction for your generosity. Speak to your accountant about maximum charitable donations you can make and claim.
2. Spouse IRA contributions
Chances are that you thought that you could only claim any IRA contributions that you personally made into your retirement account. What is important to note, however, is that if you have a spouse who is supportive of your retirement account, you can claim any contributions that they made to your account. The IRA account does have to be your own though, and you cannot claim any money you put into your spouse’s account.
3. Deduct Medicare premiums from self owned businesses
Many retirees choose to open their own business after their job duties have been fulfilled, though you may have run your own business throughout your career. If you have paid premiums to Medicare, however, and are self-employed, you can deduct those premiums. It is available in both a standardized and itemized deduction format to cover when you are ineligible for a healthcare plan that comes from an employer or someone else who pays the premium.
4. Bigger standard deduction
There are ways to save so much more money if you choose to perform a standardized deduction rather than an itemized deduction. Individuals who are single have reported receiving well over $1600 on their tax returns. If you are married though, you can earn even more with both you and your spouse each receiving at least $1300 more through filing a tax return that contains a standardized deduction on it.
5. Avoid taking a full pension payout
This is one tax deduction that you should not pursue as a senior as it can cause more financial difficulties in the long run. If you cash out your pension in full, 20% of it will be kept for your tax return and you may even have to pay part of that. That makes the cashout not worth it right away, especially as you do not earn as much as you had expected to from the pension.
Completing your taxes can be confusing if you are looking to receive the biggest refund that you possibly can as a retiree. Consider the tax deductions above and consider using a standardized deduction if you want to earn the most that you possibly can back on your taxes. It is important to take care of you and your loved ones, and this comes from not having a large tax bill to worry about.
