As people grow older they become increasingly aware that “…in this world, nothing is certain but death and taxes.” Those of us involved in Elder law underscore other sayings: “Plan Ahead!” and “An ounce of prevention….” Senior citizens need to plan now, while they are able, to make sure that their estates are passed to intended beneficiaries. Planning can reduce death taxes administrative expenses and the possibility of disputes among family members and others. Even more important: the peace of mind which comes from knowing that financial affairs are in order.
Income Tax Planning
An excellent starting point for information affecting senior citizens is IRS Publication 554, “Tax Information for Older Americans.” This brochure is available free of charge by calling the IRS at 1-800-829-3676. You may also want to check the IRS website: www.irs.ustreas.gov.
Tax Preparation
Many times senior citizens, especially those with fixed incomes, find it difficult to hire a tax professional. For elderly people with limited means, volunteers are available in many areas to prepare tax returns. Your local public library is usually able to help you locate the nearest volunteer income tax assistance program. The Internal Revenue Service also provides walk-in tax preparation service free of charge. For the IRS service center nearest you, call 1-800-829-1040.
What you should know at Age 65
You should be aware that you are allowed an additional standard deduction when you reach age 65. You will want to go over all instructions very carefully, especially as you choose between using the standard deduction and itemizing deductions. When elderly taxpayers itemize deductions, they lose any benefit from the additional standard deduction.
The general rule is that a person must have attained age 65 before the end of the tax year. However if your birthday is on January first, you are permitted to increase the standard deduction for the tax year prior to reaching age 65.
Income Tax Credit Age 65 or Older
Taxpayers age 65 or older may receive a “tax credit” that is subtracted from your income tax if you have limited income. The allowable credit varies according to the taxpayer’s filing status. A single individual’s credit can be as much as $5,000, whereas a married couple’s maximum credit is $7,500. The calculations for determining your tax credit can be complicated and may require the assistance of a tax professional.