The IRS offers certain tax breaks for seniors and retirees, as well as tax debt relief if you have unpaid taxes. Seniors are often on a fixed income, so, when you’re age 65 or older, you might qualify for IRS senior tax credits.
These tax breaks often mean the difference between making ends meet or struggling to make payments.
Tax Breaks and Tax Credits for Seniors
Here are the IRS tax breaks and credits you may qualify for when you’re a senior age 65 or older:
Bigger Standard Deduction for Seniors Age 65 or Older
When you reach age 65, you qualify for a bigger standard deduction (the part of your income that’s not taxed by the IRS). This is because the IRS offers an additional deduction for seniors.
As a senior your standard IRS tax deduction depends on your filing status and the annual IRS changes. For the 2022 tax year, the standard deduction for seniors is $14,700 for single filers ($12,950 + $1,750) and $28,700 for married couples ($25,900 + $2,800). Each additional standard deduction amount for seniors increased $50 per person from 2021.
In addition to a bigger standard deduction when you turn 65, you may also qualify for more deductions if you and/or your spouse are blind.
Higher Gross Income Threshold for Filing Taxes for Seniors Age 65 or Older
If you or your spouse are 65 or older, you have a higher gross income threshold before you must file a tax return. As an example, the income filing requirement for single seniors for the 2021 tax year was $14,250 ($1,700 more than people under 65).
For married seniors filing jointly for the 2021 tax year, the income threshold was $26,450 (one spouse older than 65) or $27,800 (both spouses older than 65). These were $1,350 and $2,700 higher than for taxpayers under 65 respectively.
Your gross income is the total from all income sources before any deductions. For seniors, it includes pensions, annuities, dividends, interest, capital gains, and IRA distributions.
If your sole income is social security benefits, social security income is excluded from gross income. However, taxes can be withheld from your social security payments.
Tax Credit for Seniors Age 65 or Older (Credit for the Elderly or the Disabled)
This senior tax credit amount is between $3,750 and $7,500. You may be eligible to receive the senior tax credit for the elderly or the disabled if you are:
- Senior age 65 or older
- OR Retiree on permanent disability that’s taxable
AND
- Have an adjusted gross income
- OR total of nontaxable Social Security, disability income, and pension/ annuities is “under specific limits”
Additional IRA Contributions for Seniors
In some cases, you can continue making IRA contributions even when retired. Whether you can make additional contributions to your IRA as a retired senior depends on:
- Whether your spouse still works and has enough earned income.
- Your spouse contributes to your IRA.
- Total contributions to your IRA and your spouse’s IRA are less than or equal to $14,000 if you’re both over 50, or $13,000 if only one of you is over 50. The difference is people over 50 can make a $1,000 catch-up contribution each year, so $7,000 total per person instead of $6,000.
Medicare Premium Deductions for Seniors (If Self-Employed)
As a senior who is self-employed, you can deduct your Medicare premiums (Parts B and D or supplemental). You can deduct Medicare whether you itemize deductions or not. Note that you won’t be able to take this deduction if you already receive retiree medical coverage or are covered by your spouse’s medical plan.
Social Security Tax Exemption for Seniors
If you are a senior age 65 or older, you could qualify for some social security tax exemption, so you won’t have to pay taxes on your full Social Security income. These individuals may also include those who are:
- Single filers with income less than $25,000
- Married couples filing a joint tax return with combined income less than $32,000
Tax Debt Relief for Seniors
Here are the IRS tax debt relief programs you might be eligible for when you’re a senior age 65 or older:
IRS Payment Plans and Installment Agreements for Seniors
If you’re a senior and can’t pay taxes you owe the IRS, one tax debt relief option is to apply for an IRS installment agreement to pay your taxes over time. To qualify for an IRS payment plan, you must have filed all required tax returns and not be in open bankruptcy proceedings.
IRS Offer in Compromise for Seniors
If you’re over 65 and want to settle your back taxes for less than the full amount you owe the IRS, you can submit an Offer in Compromise. When you submit your offer to the IRS, the IRS will review your financial situation to determine your ability to pay your full tax liability and whether to accept a lower amount.
To qualify for an Offer in Compromise, you must:
- File all required tax returns
- Be current with required estimated tax payments and any federal tax deposits (if you own a business that’s not a corporation)
- Not have an open bankruptcy proceeding
IRS Currently Not Collectible for Seniors
Currently Not Collectible (CNC) is a temporary status that means you aren’t able to make any tax payments, and the IRS won’t collect taxes or expect payment until your finances improve.
When you are a senior placed into CNC status, the IRS will review your tax account regularly to assess changes to your financial situation.
IRS Innocent Spouse Relief for Seniors
Innocent Spouse Relief provides seniors relief from additional taxes, interest, and penalties that result from an incorrect joint return. There are three types of innocent spouse relief: separate liability for one item, relief by separation of liability, and equitable relief.
IRS Penalty Relief for Seniors
If you are a senior over 65, you may qualify for IRS first time penalty abatement or reasonable cause penalty relief if you were committed to complying with tax requirements but were unable to due to extraordinary circumstances such as:
- Long term health condition
- Disaster
- Relying on advice from another party
- Honest mistake
- Lost records
Are You a Senior Who Needs Tax Help?
Tax issues can be particularly challenging for seniors and retirees. If you’re over 65, we can help you with tax breaks, tax credits, and tax debt relief for seniors.
Call us today at (866) 568-4593 or start here to take our free online evaluation.
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