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2017 Senior Tax Guide: Get the Most from Your Return

Most of us dread doing our taxes, especially if they’re complicated. Too often, older adults and caregivers miss out on important credits and deductions they’re entitled to and end up overpaying. The following tips were developed by the Senate Special Committee on Aging to help you get the most from your tax returns this year.

Taxable Income

Social Security

Wondering if you have to pay taxes on your Social Security benefits? The answer is—it depends on your overall taxable income. Start by reviewing the SSA-1099 Social Security Benefit Statement you received from the Social Security Administration.

Now, add up your income from all sources, including any tax-exempt interest you may have received, plus one-half of your net Social Security benefits. If your total income from all sources is less than the following base amounts, your benefits generally are not taxable:

  • $25,000 if you are single, head of household, or qualifying widow(er)
  • $32,000 if you are married filing a joint return
  • $0 if you are married filing a separate return and lived with your spouse at any time during 2016 ($25,000 if you lived apart from your spouse for all of 2016)

If your totals are in excess of the above amounts, some portion of your social security benefits (up to 85% in some cases) will be included in your taxable income.

You can find a worksheet to help with the calculations in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

Pensions and annuity payments

Federal income tax will generally be taken from the taxable part of your pension and annuity payments. This includes distributions from:

  • An IRA
  • A life insurance company under an endowment
  • An annuity or life insurance contract
  • A pension, traditional annuity, profit-sharing or stock bonus plan, or any similar plan that defers the time you receive compensation

Learn more about pensions and annuities, including how to adjust your tax withholding amount.

Itemized Deductions

There are two important deductions you may be overlooking.

  • Medical and dental expenses: You can deduct unreimbursed medical expenses if they are at least 10% of your adjusted gross income if born on or after Jan. 2, 1952, or at least 7.5% if born before this date. Any medical or dental expense for diagnosis, cure, relief, treatment, or prevention may be deducted. You also can include transportation expenses for needed medical care and payments for qualified long-term care insurance and expenses for unreimbursed costs of long-term care. Use this worksheet to determine allowable expenses.
  • Casualty or theft losses: If you lost property or income due to a casualty—such as a tornado, flood, storm, fire, auto accident, or theft—you may be able to deduct the portion of the loss not covered by insurance or other reimbursement. Learn more.

Tax Credits

There are four main credits you might be able to take advantage of as a caregiver or older adult.

  • Credit for dependent care expenses: If you have a qualifying dependent—a spouse or other person who was physically or mentally unable to care for themselves or a grandchild under age 13 who is not claimed by a parent—who lived with you for more than six months in 2016 and who spent at least eight hours in your home each day, expenditures for care outside the home are eligible for this credit. Learn more.
  • Credit for the elderly or disabled: If you’re aged 65+, or under age 65 and retired with a permanent disability for which you’re receiving taxable disability benefits, you may be eligible for this credit if you meet certain requirements.
  • Premium tax credit: This credit is for a person who enrolls—or whose family member enrolls—in a qualified health plan offered through HealthCare.gov or a state marketplace and who receives assistance paying for health insurance premiums. Learn more about the credit and how to take advantage of it.
  • Earned income credit (EIC): If you’re aged 65+ with a qualified child—such as a grandchild, niece/nephew, or foster child—and are working and making less than $53,505 in earned income, you may qualify for the EIC. Learn more.

Find Free Tax Assistance

The IRS offers programs and solutions to help older adults prepare and file their tax returns.

  • The Tax Counseling for the Elderly (TCE) program helps taxpayers aged 60+ with their tax return preparation. Volunteer Income Tax Assistance (VITA) aides have been trained to help older Americans. To find a site near you, call 1-800-906-9887.
  • You can get help from an IRS Taxpayer Assistance Center by calling your local office and scheduling an appointment. Visit IRS.gov/TACLocator to find the location nearest you.
  • AARP Tax-Aide locations can be found by calling 1-888-AARP-NOW (1-888-227-7669) and entering your zip code when prompted, or by visiting AARP.org/Money/TaxAide.
  • If you do your taxes by hand, you can request that the IRS send you all the tax documents you will need. Call 1-800-TAX-FORM (1-800-829-3676) to order forms, instructions, and publications.
  • There are also several very popular online tax preparation tools that provide very straight-forward guidance for each step of the process and allow for easy preparation of your state tax forms, as well. Some are offered with different levels of assistance with costs ranging from as little as $0, and up to around $200 for more complicated situations and added audit support protection. Visit PC Magazine to see a list of the current top-rated online tax services.

File Your 2016 Taxes with Ease!

Remember that filing a tax return is mandatory for most people—even if you don’t owe any taxes. And if you’re one of the few who aren’t required to file, remember that in order to receive a refund for any taxes you overpaid in 2016, or to claim money from a number of credits, you must submit a return. Not sure if you need to file? Use this quick IRS filing questionnaire to find out.

Do you have other tax tips for older adults? Share them in the comments below.

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About Economic Security Team

Our programs help the 1 in 3 economically insecure older adults access benefits, explore how to use their home equity wisely, find training and jobs, and better manage their money.

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