Tax season can be stressful for seniors, but it doesn't have to be! Planning ahead and staying organized is the key to maximizing your retirement funds and getting the most out of your return. Whether you plan to do taxes yourself or hire a tax preparer, this guide from Senior Helpers Central Houston is designed to help you navigate the world of taxes with ease. Following are some of the basic terms you need to know regarding tax benefits and deductions, along with what they mean.
Tax Benefits for Seniors
Tax-free Retirement Income
Seniors may receive pensions and annuities, as well as Social Security benefits, without owing any federal income tax.
Charitable Contributions
Donations to eligible charities are deductible on a senior's taxes. However, it's important to note that charitable contributions must meet certain criteria in order to be eligible for a deduction.
Medical Expenses
Certain medical expenses related to healthcare costs can be deducted from seniors' taxes if they exceed 7.5% of their Adjusted Gross Income (AGI). This includes health insurance premiums and out-of-pocket medical costs like copays and prescription medications.
Tax Deductions for Seniors
Mortgage Interest
Seniors may be able to deduct mortgage interest payments on their taxes. This includes any interest paid on a home equity loan, condominiums, and other qualifying real estate.
State and Local Taxes
Many seniors are eligible to deduct state and local taxes from their federal income tax returns. The amount of the deduction is limited to a certain percentage of AGI, depending on the senior's situation.
Property Taxes
Property taxes for primary residences can often be deducted from seniors' taxes. However, these deductions are also limited by your AGI.
Investment Expenses
Investment expenses such as brokerage fees or investment advice can also be deductible for seniors who have incurred them in the past year.
Gather Necessary Documents
It's essential to provide accurate information when filing taxes. Seniors must include a copy of all their W-2 forms, as well as any 1099s. A 1099 form is issued if seniors have received non-wage income from sources such as investments, Social Security payments, pensions, or alimony.
Seniors who receive Social Security benefits will need to include these documents in their filing. Investment statements and other records related to stock trades should also be gathered ahead of time in order to accurately report any investment gains or losses on the return.
Choose a Tax Preparer
Seniors should start by researching local tax preparers, asking friends and family for recommendations, or using online services to compare their options. When selecting a tax preparer, seniors can check with certified public accountants (CPAs) or the National Association of Enrolled Agents (NAEA). These organizations provide professionals that are qualified to help seniors with taxes and often offer discounted rates for personal filing services.
Most importantly, it's important to compare fees between different tax preparers before deciding on one. Some companies may offer so-called "lump sum" fees where the cost is the same regardless of complexity while others may differ significantly depending on your individual situation.
Senior Helpers Central Houston Is Here for Your Senior
By planning ahead and remaining organized, seniors can make tax season less stressful, maximize their returns, and ensure that they are getting the most out of their retirement funds. Whether you choose to do taxes yourself or hire a professional preparer, Senior Helpers Central Houston is here to help your senior in Houston, South Houston, and Harris County stay organized. Contact us to learn more about our services!