A number of tax breaks are available for people age 65 and older for 2016 returns. Here are 5 to discuss with your tax advisor:
- Higher income thresholds: People age 65 and older may not have to file an income tax return if gross income is under certain thresholds. The thresholds are $11,900 for individuals, $21,950 for married couples with one spouse age 65 or over, and $23,200 for married couples with both spouses age 65 or older. The threshold for single filers 65 and older is $1,550 more than for single tax filers under age 65. When both spouses are 65 and older, the threshold is $2,500 higher than couples younger than age 65. Social Security is not counted as gross income unless one half of your Social Security benefits plus all other gross income and any tax-exempt interest is more than $25,000 (for singles) or $32,000 (for couples filing jointly).
- Lower threshold for medical expenses in 2016. Medical expenses are deductible for income taxes when itemized on Schedule A of your tax return. There are limits to how much you may deduct. People 65 and older may deduct the excess over 7.5% of the taxpayer’s adjusted gross income (AGI). For example if your AGI is $40,000 then you would be entitled to deduct medical expenses exceeding $3,000 ($40,000 X .075 = $3,000).
- Higher standard deduction. People age 65 and older or (blind) get an additional standard deduction. This might be your better choice when you don’t have much mortgage interest or high medical expenses. Even if only one spouse is 65 and older you can still qualify for the higher deduction if filing jointly.
- Withdrawals from Roth IRAs tax - free. Unlike traditional IRAs and 401(k)s, the withdrawals from Roth IRAs upon retirement are tax - free. Interest and other income from your Roth investments aren’t taxable.
- Capital gains on the sale of a home. If you had substantial equity built up in a long - time home and sold it, you are allowed to exempt your capital gains on the sale up to $250,000 (individuals) and $500,000 (joint).
For more information, talk with your tax professional. For a reliable tax guide for preparing your 2016 tax return, try J.S. Lasser’s Your Income Tax 2017 ,available in many local libraries and book stores.