Critter Corner: Often Overlooked Tax Breaks for Seniors

Dear Ribbit,

I read recently that Trump’s Tax Plan may eliminate the ability for seniors to deduct their medical expenses. That would certainly be a horrendous result, as my husband and I depend on that deduction. For future reference, what are some other things can seniors deduct?

Thanks,

Dee Duxions


Dear Dee,

As we all grow older, it is often a shock to realize how little money we actually have stored away for our golden years. And, with the possibility of not being able to take advantage of medical deductions, we need to find other areas where we can take tax deductions. Here are just a few often overlooked deductions that are available under the current tax law which, as you know, is always subject to change:

Credit for the Elderly or Disabled
If you or your spouse is age 65 or older, you have a low income, and you file using form 1040 or 1040A, you could be eligible to claim a tax credit simply called “Credit for the Elderly or Disabled.” Retirees who qualify may be able to reduce their tax bill by taking the credit. Younger people who are retired and disabled might also qualify. Review IRS Publication 524 to see if you qualify.

Additional IRA deduction
Workers age 50 and older can contribute an additional $1,000 to an IRA, or a total of $6,500 for 2017. A 50-year-old worker in the 25% tax bracket who maxes out his IRA would save $1,625 on his current tax bill, $250 more than the maximum possible tax break of $1,375 for a younger retirement saver in the same tax bracket.

Charitable Contributions
You can deduct charitable donations if you make them to qualified organizations and you itemize deductions. You’re even allowed to deduct expenses directly related to charity work, such as mileage or parking. Keep your receipts or other documentation for all of your charitable donations with your tax records. When it comes to charitable giving, however, be careful. For details, see Evan’s article from last week and our Perils of Gifting FAQ.

Property tax breaks
In most states and local jurisdictions, people above a certain age who earn below a specific income level and have limited assets can qualify for real estate and/or school tax deferrals or exemptions.

Estate Planning
The Tax Court has ruled that twenty percent (20%) of non-itemized estate planning was deductible as tax advice under Section 212(3). So, we suggest that 20% of the total fees that you paid to our firm can appropriately be considered deductible tax advice. Read more about this here.

As stated above, things could change with the new tax plan, and the info above is for 2017 taxes. So, when it comes to these things, pay careful attention to any changes in the future.

Hope this is helpful,

Ribbit

 

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