12 Tax Deductions Everyone 50+ Needs to Know About
We all know that figuring out tax deductions is challenging, and it’s especially hard when you’ve celebrated more than half a century of life’s ups and downs. However, we’ve got some advice that just might help you. Here are 12 tax deductions that anyone over the age of 50 should definitely know about.
1. Higher Standard Deduction
Once you hit the big 5-0, the IRS starts seeing you in a new light by giving you a larger standard deduction. It’s like a birthday present that keeps on giving every year you file! This can be a pretty practical improvement for your tax situation, potentially reducing the amount of your income that’s subject to tax.
2. Dealing With Healthcare Costs
All those dollars you’re spending on keeping yourself ticking over, from your teeth to your toes, could actually give your tax bill a trim. Yes, the IRS allows for deductions on plenty of out-of-pocket healthcare expenses. Everything that falls under the umbrella of keeping you healthy could potentially ease your tax burden.
3. Fueling Your Future
If you’re being careful about funding your IRA, congratulations! This will gear you up for a relaxed retirement and help shrink your current taxable income. Remember, there’s no expiration date on contributing to a traditional IRA, so feel free to keep funneling funds into your nest egg.
4. The Perks of Downsizing
You could always try swapping your current home for a dreamier home or a snug cottage by the sea. And the best part of all? The IRS won’t get involved! When you sell your primary residence, you can get tax-free status on the profit up to a certain ceiling. So go ahead and get your next adventure without any kind of penalty!
5. Investing Wisely
As the tax rules change, some investment-related expenses have lost their deductible status, yet others remain standing. When those costs are directly tied to generating taxable investment income, you should still get approval from the IRS. It’s an incentive to keep nurturing your investment portfolio as you deal with your golden years.
6. The Joy of Giving
Giving to charity feels good – but it also does so much more than that as well. Any donations you make to approved charities could trim down your taxable income. If you choose to support a cause dear to your heart, you’ll help to further their mission and also help yourself during tax season.
7. Deductions for the Enterprising Retiree
If retirement for you means turning a passion into a business venture, the IRS supports your entrepreneurial spirit. The costs you have to deal with when doing this, like maintaining a home office or traveling for business, are deductible. It’s because you’re continuing to contribute to the economy, even during your retirement.
8. Greening Your Space
Taking steps to make your home more energy-efficient, whether it’s through installing solar panels or going for a new, greener heating system, doesn’t just lower your energy bills. These eco-friendly upgrades could also unlock tax credits. It’s a reward for reducing your carbon footprint!
9. A Win-Win
Pumping money into a Health Savings Account (HSA) is basically a way of giving your future self a financial health boost. These contributions are deductible, and as long as you use them for qualifying medical expenses, the growth is tax-free. It’s a great way to manage both your health and your taxes.
10. Understanding Social Security Taxation
The taxable portion of your Social Security benefits is not set in stone, as it changes with your combined income. Getting to grips with the thresholds that apply can be really useful in reducing the taxable portion of your benefits. This way, you get to keep more of what you’ve worked hard to earn.
11. Insuring Your Future
Paying premiums for long-term care insurance? You might be able to deduct those costs as well. With the price of long-term care on the rise, this deduction can be a huge financial advantage for you, making it a little easier to plan for the care you may need further down the line.
12. Estate Planning Advantages
When you’re planning your estate for retirement, there are certain legal expenses that may actually be deductible. These include those linked to managing or accruing taxable income. It’s a pretty challenging part of tax law, but looking into it could lead to significant tax savings that could make it worthwhile.
You Can Do It!
Yes – understanding the tax code might be difficult, but as long as you have the right information, it should be a little easier. Remember, the goal is to keep as much of your hard-earned money as possible while staying within the bounds of the law. These 12 deductions are just the tip of the iceberg and a great starting point!
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.