Tax obligations change as we age, and our golden years bring unique milestones, like paying off a mortgage that would otherwise be unreachable. Typically, senior citizens have put in years of hard work and over the span of several decades, paid thousands in taxes overall. Individuals age 65 or older receive Social Security benefits, with additional tax breaks that are beneficial to those on a fixed income.

senior citizen facing back taxes

Senior Citizens Filing Taxes

Certain taxpayers, 65 years or older can earn more before paying taxes. Senior citizens who are considered single taxpayers, file tax returns once they have earned $13,600. Taxpayers under 65 years of age pay taxes after earning $12,000. You may not be required to file taxes whatsoever, especially if those earnings are narrowed down to Social Security benefits alone.

When married couples are filing jointly and one (or both) of you is under 65 years of age, you can earn up to $24,000 before being required to file taxes. However, when one spouse is 65 or older, you can earn up to $25,300 before filing taxes and $26,600 when you are both 65 and older. Senior citizens enjoy the benefit of eased tax thresholds, whether they are single or married to bring tax relief to those surviving off Social Security.

Deductions & Tax Credits

Older United States citizens are also able to enjoy certain deductions, exemptions, and tax credits that are only available through retirement. Country-wide federal tax relief is also available for seniors, as well as statewide programs for aging citizens as needed.

Senior Tax Credit
In addition to seniors, disabled citizens may receive a tax credit if you discover that the IRS owes you taxes at the end of the year. To qualify, you are required to be 65 years or older, as of the final day of that tax year. Non-resident aliens may still qualify, in the situation where they are married to a resident alien or United States citizen.

Those who are married and wish to apply for the tax credit, will be required to file taxes jointly unless you did not live with them during the tax year. This filing status permits you to receive the credit if you are considered head of household if your spouse did not live with you after June 30th. However, there are a variety of rules that apply to this tax credit.

It is important to note, you need to file a Form 1040, or Form 1040A for the Credit for the Elderly or Disabled. The Form 1040 Schedule R will assist you in calculating your tax credit. Also, be aware, you cannot qualify for this credit with Form 1040EZ. Your eligibility in claiming this credit is dependent upon your income, and you won’t qualify if you earn beyond the income limit for your filing status.

In order to qualify for the senior tax credit, you must meet income caps. These numbers are based on your adjusted gross income (or AGI), not on your total income. Your adjusted gross income is calculated after subtracting deductions from your taxable income. Limits to qualifying senior citizens, aside from income caps, also apply to nontaxable portions of Social Security earnings – plus nontaxable portions of annuities, disability income earnings or pensions.

$12,500 or more when filing separately (as widow(er) or head of household)

$17,500 or more with single filing status (as widow(er) or head of household)

$20,000 or more with married filing status (when one spouse qualifies)

$25,000 or more when filing jointly as a married couple.

If your income is not under both limits, you will not qualify for the senior tax credit. You will be excluded for this credit if your income is over in either category. The senior tax credit may be used to erase taxes owed to the IRS, is also nonrefundable. Essentially, this means any amount leftover is balanced out once your debt is zeroed out. In regard to limits on nontaxable funds:

$3,750 when filing a married return separately (if you lived apart for the entire year)

$5,000 when filing as single, widow(er) or head of household

$5,000 when filing as married (with one qualifying spouse)

$7,500 when filing jointly, as a married couple

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Standard Deduction Changes

You will receive an additional standard deduction as part of the available tax relief for seniors from the IRS when you turn 65. If you are single, or filing head of household, you can receive an additional $1,650 on top of standard deductions in the 2020 tax year. You can add an additional $1,300, if you are married and filing jointly, for each spouse who is at least 65 years old. In the case of one of you being 65 or older, you are only eligible to claim one of the additional deductions.

You should note that the standard deduction is claimed in place of itemized deductions. You cannot do both and, in most situations, the standard deduction makes sense because of the large amount of qualifying expenses required to receive the most value. These deductions were introduced in 2018, and will continue until 2025. The Tax Cuts and Jobs Act, also known as TCJA, basically doubled standard deductions for all filers – or pretty close to it.

Extra standard deduction, in addition to regular deduction, provides bigger payoffs for senior taxpayers, when compared to itemized deductions. Those individuals who have paid off their mortgages tend to benefit the most, considering there are no applicable itemized interest deductions to write off.

However, when senior taxpayers are still paying on a mortgage, itemized expenses makes more sense. Donations, medical expenses, property taxes, as well as various qualifying expenses, may be chosen for itemization as well. All deductions are subject to limits, which make it vitally important compare standard deductions to itemized deductions in order to see what produces the best result. Taking advantage of the best tax breaks by utilizing the most beneficial deductions, is the smarter, more lucrative option for most senior citizens – especially those who that need easier options.

Social Security & Taxes

Not all Social Security benefits are subjected to taxes. Paying taxes on Social Security funds depends largely on a few factors you should educate yourself on. In order to know for sure if you are required to pay taxes on Social Security income, you need to add up your income total. This includes Social Security, tax-exempt interest and taxable retirement earnings. The final result is known as your combined income, when you add these numbers to half of what you get in annual Social Security funds. Essentially:

Adjusted Gross Income + Nontaxable Interest + ½ Social Security Benefits = Combined Income

Close to the beginning of each new year, the Social Security Administration sends out a Form SSA-1099 in the mail. This details the amount of money you received over the past tax year. If you are single, widowed or head of household, the combined income limit is $25,000.Social Security Benefits will not be included in your taxable income, if it falls beneath this amount.

The income limit increases to $32,000 for those married, filing taxes jointly. If you are married, consider filing a joint return, unless you want to pay taxes on a portion of your benefits (when filing separately). However, this does not apply to you if a portion of the tax year was spent living separately from your spouse.

In the 2020 tax year single filers, with a combined income between $25,000 and $34,000, will pay income taxes on up to 50% of their Social Security benefits. Anything over $34,000 and you will be liable to pay on up to 85% of their funds. Alternatively, married couples filing jointly, with combined income from $32,000 to $44,000, will pay income tax on up to 50% of their Social Security funds. When their combined income is beyond $44,000, they will pay on up to 85% of their benefits.

Anyone in need of assistance in determining whether their Social Security funds are taxable, as well as the amount, the IRS has designed a tool to help. The Notice 703 was designed to assist with determinations in regard to taxing Social Security benefits, regardless of the tax year.

Property Taxes

In the situation where a homeowner is an older taxpayer, there are tax breaks available to senior citizens specifically, in order to relieve property tax burdens. Rising taxes are an issue for those over 65, especially considering the fact that they survive on rather limited, fixed incomes. These tax breaks protect the value of homes, which may increase and raise property tax bills when the owner is on a limited income.

  • Considerations
    Local governments are in control of imposing property taxes, not federal. Since each state has their own rules on property tax, it is important to learn about the taxes that apply to your place of residence. There are also a variety of tax differences if you live in the city, verses the county, in addition to state-wide laws and regulations.
  • Calculations
    Your local tax authority, if you own property, is in charge of appraising it and assigning fair market value (based on local comparative property). You get the final property tax result, once the tax rate of the area is added in. For example, when your home is valued at $200,000, you could end up owing $5,000 with a property tax rate of 2.5%.

    Some states offer various tax relief programs, especially for seniors on set incomes, in order to offset rising taxes. A few states worth mentioning, with prominent property tax exemptions include:

    Alaska – $150,000 exemption (65 years+)

    Honolulu – $140,000 exemption (65 years+)

    New York – 50% appraised value (Income below $29,000 for 65+ up)

While may tax exemptions are worth the process, property taxes are low everywhere – beyond the demographic of senior citizens. Idaho, Indiana and New Mexico provide some of the lowest property tax rates across the country, which is especially helpful for those concerned with rising costs. Because of this, many retirees choose to move to states offering lower property tax rates, in order to enjoy homeowner benefits without the higher property taxes.

Getting the Help You Deserve With Your Tax Debt

It is never a good idea to approach complex financial decisions without sound advice from people who really understand the choices you’re weighing. That is why tax professionals are there, to give you the resources to reach the best possible understanding with the IRS. If you are a senior citizen in need of help with tax debt relief, contact us today by phone (1-888-548-0478) or email.