Tax Tips for Retirees
Today’s seniors live longer and more active lives after retirement, typically enjoying an average of another two decades of retired living. Planning before and during retirement is important to making your money stretch, but you can also take steps to protect your wealth after making the choice to retire. These tax tips will help you fund your dreams and let you continue to enjoy the active adult living you had before retiring.
Consider Your Retirement Date
If you’re looking at retirement but haven’t yet reached it, take a look at whether waiting could give you a bonus to your Social Security payment. How much of a difference can deferring your Social Security payment make? Delaying payments to age 70 increases your benefits by close to 30 percent, according to the Social Security Administration. You’ll also want to talk over deferment with your spouse as the partner who has earned more money may want to wait while letting the other claim benefits earlier.
Make the Most of Medical Deductions
Even for healthy seniors, medical expenses mount as you need a wider range of tests for good preventive care. Most of these additional expenses are tax-deductible, including your Medicare premiums and any co-pays you may have at your doctor’s office. Currently, you can claim deductions on all medical expenses that exceed 7.5 percent of your adjusted gross income, or AGI, but in 2019, that’s due to go up to a 10 percent threshold, so prepare for a change soon with investments in health savings accounts if possible.
Take Your Senior Deduction
If you’re over 65, you’re eligible for a minimum of an additional $1,250 to your standard deduction and may be able to increase it to $2,500, depending on your and your spouse’s age and filing status. If you’re filing jointly and your spouse is under 65, your deduction is $1,250. As a head of household or single filer, that increases to $1,500. When you and your partner are both over $65, that deduction increases to the $2,500 maximum. Many retirees who have recently passed this milestone birthday aren’t aware that this deduction exists, so read tax forms carefully or hire a tax planner who will make sure you get all your eligible deductions.
While much of your retirement savings can be taxed, some investments are tax-free or subject only to state and local taxes. Municipal bonds are an especially wise investment choice because they’re also free of state taxes to encourage you to reinvest in your community. Texas enjoys some of the most reliable municipal bonds in the country, thanks to fast-growing communities throughout the state. Savings that are part of a Roth IRA account are also tax-free for withdrawals as you already paid taxes on them at the time of investment.
If you’re on a fixed income or have additional expenses, it’s sometimes a challenge to increase your charitable spending, but donations of all kinds can give you a tax break while helping others. Donations of cars, furniture and other items are often tax-deductible, and they’re also a great way to free yourself of years of belongings you may no longer need or want. Retirement is a time for many people to take stock and accomplish life goals they’d deferred during their working years, and part of that process often involves paring down your possessions. Why not put them to use while saving on your taxes?