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Seniors living on tight budgets can use every advantage they can get, especially when it comes to taxes. So don’t leave this money on the table. This is a starting point for the top tax deductions for seniors.
The definition of medical and dental expenses, according to the IRS, includes: medical services, treatment, equipment, supplies, insurance premiums, transportation, long-term care, long-term care insurance and even stop smoking programs. To see them in all their glory, visit IRS Publication 502.
Here are the basics to qualify:
You must itemize these expenses on Form 1040’s Schedule A. And you can only deduct expenses that are more than 7.5% of your adjusted gross income (AGI) from your 1040.
For example, an AGI of $40,000 x 7.5% is $3,000. If you had $5,500 in medical expenses, you can deduct $2,500 ($3,000 – $5,500). If your expenses were only $2,000, you’d be out of luck.
If you, your spouse or a dependent are in a nursing home, assisted living facility or the like, you may be able to deduct some of the expense. If you are in one of the facilities for medical reasons (most people are) you may deduct lodging, meals, medical expenses. Another deductable expense is what’s known as a life-care fee that a facility charges for continuing health care at the facility. This could be an upfront fee or a monthly fee and usually both.
See Health Care Tax Deductions for more detail. And you can always wade through the IRS’s Publication 502.
This credit is based on age, income and filing status. Use Schedule R (Form 1040A or 1040) to complete. Here are the qualifications for this deduction:
See IRS Publication 524 for detailed examples.
Did you downsize? Move in to an independent living community, assisted living or nursing home? If you sold your home, you can “exclude from income any gain up $250,000 ($500,000 on a joint return in most cases) on the sale of your main home,” according to the IRS’s Senior Tax Guide [pdf].
Here are the qualifications:
Exception: During the 5-year period before you sell your home, if
Generally, to calculate your selling profit:
Selling price, minus closing costs such as points, prepaid interest, selling costs, prorated property taxes (you cannot include mortgage insurance, notary, escrow, appraisal, et al), and the property’s tax basis. Selling costs include broker’s fees, advertising costs, improvements you made to the property for selling purposes as long as it was 90 days prior to the sale.
If you’re not itemizing the above deductions (and others not listed) or the total of your itemized deductions is less than the standard deduction, take the standard deduction.
These deductions are adjusted every year for inflation. Currently, they are:
This is just a starting point for tax deductions for seniors. You can find a more detailed discussion on Health Care Tax Deductions. And if you are a caregiver for an elderly spouse, check out Caregivers and Tax Credits. And for really detailed stimulation, there’s always IRS Publications 502, 524, and 554. You might be surprised at what qualifies for a medical deduction. Finally, your local tax professional should be able to give advice and translate the many rules in these publications.
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