Older taxpayers receive some tax breaks

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Carole Feldman

You’ve downsized to an apartment, the kids are long gone, and you’re no longer eligible for some of the deductions and exemptions that had helped you lower your tax bill.

But for those 65 years or older, there are other tax breaks that might benefit you come tax time.

Social Security taxes

For one, not all your Social Security benefits are subject to federal taxes. How much depends on your other income and filing status. “No one pays federal income tax on more than 85 percent of his or her Social Security benefits,” the Social Security Administration says on its website.

To determine what percent of your benefits might be taxable, add half your benefits to your other income, including nontaxable interest. If your combined income is between $25,000 and $34,000 and your filing status is single, up to 50 percent of your benefits might be taxable, according to the IRS. For married couples filing jointly, the 50 percent taxable figure applies if your combined income is between $32,000 and $44,000.

Combined income lower than the threshold? Social Security benefits aren’t taxable. If the combined income is above these income ranges, up to 85 percent is subject to income taxes.

While some states also tax Social Security benefits, you won’t have to pay state tax on them in Maryland, Virginia or the District of Columbia.

Higher standard deduction

People 65 and over also should consider whether it’s more beneficial for them to claim the standard deduction or to itemize.

The standard deduction is higher  — $7,750 if your filing status is single, $14,800 if you’re married filing jointly and you and your spouse are both at least 65. That compares to $6,200 for single filers under 65 and $12,400 for married taxpayers under 65 who are filing jointly.

“Seniors very often have already paid up their mortgage and they very often don’t itemize anymore,” said Jackie Perlman, principal tax research analyst at the Tax Institute at H&R Block.

But it’s important to do the math — or let your tax preparer or tax software do it for you — to see whether it still makes sense to itemize even with the higher standard deduction.

Even if you don’t have mortgage interest to deduct, you can still deduct any property taxes you paid. State income taxes also are deductible, or alternatively, you can choose to deduct state sales taxes, an attractive option if you live in a state that doesn’t have an income tax.   

Medical expenses

For those 65 and older, medical expenses are deductible to the extent they exceed 7.5 percent of adjusted gross income. That threshold applies even if only one spouse has reached 65 and you file jointly. For those under 65, medical expenses are deductible only if they exceed 10 percent of adjusted gross income.

Medical expenses include the portion of doctor, dentist and hospital bills, and the cost of prescription drugs not covered by insurance, as well as premiums for Medicare or other insurance coverage. Prescription eyeglasses are also included, as are the cost of false teeth, hearing aids, wheelchairs and the cost of transportation to medical appointments.

Of course, charitable donations are deductible by everyone who itemizes. However, taxpayers who are at least 70 1/2 had another option for charitable donations that was extended in December only through the end of 2014.

At that age, you’re required to take a minimum distribution from your individual retirement accounts. If you rolled that distribution over directly to a charity by Dec. 31, 2014 — instead of taking the money and then donating it — the distribution is not counted as income and therefore is not taxable.

“The difference is you’re lowering not only your taxable income but also your adjusted gross income,” Perlman said. And that can affect such things as whether Social Security benefits are taxable and whether you can deduct your medical expenses.

But there’s no double-dipping. If you itemize, you can’t also deduct a charitable donation that was made through a direct rollover from an IRA.

There is also a small tax credit for low-income seniors, which Perlman says is not widely used. “It might be helpful for someone who neither contributed to the Social Security system nor ever married.”

Free tax prep assistance

The IRS offers free tax preparation help for people 60 and older, working through non-profit groups. Two organizations provide such assistance at many locations throughout the Washington area.

 The AARP Foundation Tax-Aide program is available free to taxpayers with low and moderate income, with special attention to those 60 and older. You do not need to be a member of AARP. For more information or to find a location near you, go to www.aarp.org/money/taxes/aarp_taxaid or call 1-888-687-2277,

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people of all ages who generally make $53,000 or less, as well as to older adults and people with disabilities. To find locations, see http://irs.treasury.gov/freetaxprep.

— AP