When tax season rolls around, many people dread having to pay a sum of money to the government. However, seniors may have some advantages when it comes to what they can claim on their tax forms. There are a number of tax deductions designed with senior lifestyles in mind - they aim to trim the tax costs for older Americans so they can save their hard-earned money for senior care and other expenses they may have.
Some seniors may not be aware that there are deductions available to them, or which ones they qualify for. Here are some deductions seniors should be sure to take advantage of this tax season.
Many seniors have high medical bills - in fact, medical and dental bills are often among the most significant expenses for seniors each year. Fortunately, when tax season rolls around, seniors may be able to use these costs to their benefit. Health insurance premiums, including Medicare premiums, are tax deductible, as are long-term care insurance premiums, prescription drugs, care in a skilled nursing facility and most other out-of-pocket expenses seniors had for healthcare over the course of the year. These costs are deductible on Schedule A of a tax return as long as they only amount to 7.5 percent of your adjusted gross income, according to Nolo, a legal guide company.
If a senior recently sold his or her house to move to an assisted living community or retirement home, he or she may not have to pay taxes on the profit from the home sale. If the older adult lived in the home for at least two of five years before he or she sells the house, there is no tax on the profit from the sale, according to the IRS.
Certain investments that are providing seniors with income though dividends and capital gains are not subject to Social Security and Medicare taxes, unlike income from a job or business. Plus, any out-of-pocket fees the senior incurred for investment advice or other financial services are deductible as long as they and the individual's itemized personal deductions make up at least 2 percent of his or her adjusted gross income, Nolo reports.
Many seniors choose to give portions of their retirement savings or other incomes to charitable organizations throughout the year. If a senior gave back, that donation is likely deductible when listed as an itemized deduction. There are some limitations, though. Cash donations are deductible for up to 50 percent of the senior's adjusted gross income, but for property like cars, boats or other large items given to a qualified organization, the deduction is limited to the proceeds of the sale by the organization that sells it.