Critter Corner: How Does the Tax Act Change Things for Seniors?

Dear Magic,

I am working on my 2018 taxes now. I understand that the Tax Cuts and Jobs Act is in effect for this year’s taxes. How does this tax reform affect U.S. citizens ages 65 and older? Any financial credits still available for family caregivers?

Thanks!

Chan Jess

Dear Chan,

The new tax laws are the most significant overhaul of the American tax system in more than 30 years. As you mentioned, most of the tax changes take effect with 2018 taxes (this year).

How New Legislation Affects Taxpayers 65 and Older

The standard deduction has increased from $6,350 to $12,000 for singles and from $12,700 to $24,000 for married couples filing jointly. Taxpayers ages 65 and older or who are blind or disabled can continue to claim an additional $1,300 ($1,600 for unmarried taxpayers), as the additional standard deduction remains intact. This means that many seniors will find it no longer beneficial to itemize deductions because of this larger standard deduction.

As in previous tax years, seniors may be able to reduce their taxes owed through a credit for the elderly or for those with disabilities. Also, if an individual is age 65 or older and receiving just Social Security, this income, in many cases, is not included in gross income. See our article immediately prior to this one.

Tax Tips for Family Caregivers

Family caregivers may be able to claim a deduction for the care of a dependent parent or obtain a tax credit for caregiving expenditures under the Child and Dependent Care Credit. Some employers offer dependent care benefits through a flexible spending account, which can save employees from paying taxes on a dependent senior’s care, including the payment for adult day care and in-home care services. Medical expenses for a dependent parent are also tax deductible.

Other New Tax Rules That Affect Taxpayers in General

Tax rates. The new law imposes slight rate adjustments to the seven tax brackets: 10, 12, 22, 24, 32, 35 and 37 percent.

Itemized deductions. With the increase in standard deductions, many taxpayers will no longer benefit from itemizing their deductions. If you do itemize, miscellaneous itemized deductions that no longer count include tax preparation and tax advice expenses, investment expenses, and unreimbursed employee expenses.

Exemptions. Starting in 2018, taxpayers cannot claim personal or dependency exemptions.
State and local taxes. The new tax laws still allow an itemized deduction for state and local income and property taxes, but starting in 2018, the total deductible amount is limited to $10,000. This new rule will more significantly impact property owners in high-tax states such as New York and California, and also many in our DC Metro area.

Medical expenses. For the tax years 2017 and 2018, medical expenses that exceed 7.5 percent of adjusted gross income (AGI) are deductible for all taxpayers. For most taxpayers, the previous threshold for deducting medical expenses was 10 percent of AGI. Unfortunately, beginning in 2019, the medical expense threshold goes back up 10% of AGI.

Hop this is helpful!
Magic

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About Renee Eder

Renee Eder is the Director of Public Relations for the Farr Law Firm, and gives the voice to the Critters of Critter Corner. Renee’s poodle, Penny, is an official comfort dog who she and her children bring to visit with seniors who are in the early stages of dementia at a local senior home once a month.

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