When you grow old, you are signed up for a lot of perks that you really don't want. Some of these can be grey hair, wrinkles, aches and pains, and perhaps even health problems. This article is going to go through some of the tax benefits of growing old. These are some of the benefits that the government gives away for free that are actually things that senior americans actually are looking forward.
Tax deductions for seniors. People age 65 and older are eligible for larger than usual standard deductions. If you are single, head of household and over 65 you get to add $1,550 to the standard deduction if you are older than 65 and blind. If you are married, you only get to add $1,250 but you can add it up to 4 times. Two questions for each spouse. If an individual or at least one member of a married couple is age 65 or older, you can deduct medical expenses that exceed 7.5 percent of your adjusted gross income, compared to 10 percent for younger taxpayers. This would only be if you itemize your deductions.
Relaxed tax filing requirements. People 65 and older can bring in $1,550 more (or $1,250 more per spouse age 65 and older if filing jointly) than younger people before they are required to file a tax return. Seniors can have a gross income of up to $11,850 as individuals or $23,100 as part of a couple where both members are 65 or older before they are required to file a tax return.
Bigger retirement account limits. Workers age 50 and older can defer paying income tax on as much as $24,000 that they contribute to a 401(k) plan, $6,000 more than younger workers. The IRA contribution limit is also $1,000 higher for workers 50 and older, or $6,500 in 2016. The catch is that you are typically required to withdraw money from traditional retirement accounts and pay the resulting tax bill after age 70 1/2. However, retirees age 70 1/2 and older can avoid paying income tax on any amount up to $100,000 that they transfer directly from an IRA to a qualifying charity. Let me repeat that: The money must transfer directly from an IRA to a qualifying charity. It can't go into your checking account and you write a check.
No more early withdrawal penalty. Once you turn age 59 1/2, there's no more 10 percent penalty to withdraw money from your IRA. If you leave your job at age 55 or later, you can begin taking penalty-free 401(k) withdrawals from the account associated with the job you left at an even earlier age.
Social Security payments. You can sign up for reduced Social Security payments as early as age 62 or claim the full amount you have earned at your full retirement age of 66 or 67, depending on your birth year. If you delay claiming your payments past your full retirement age up until age 70, you will earn delayed retirement credits that will further increase your monthly benefit.
Affordable health insurance. Retirees don't need to worry about finding a job that provides health coverage or the sometimes high out-of-pocket costs of health insurance plans purchased through state health insurance exchanges. Once you turn age 65, you can sign up for Medicare. Most retirees don't pay anything for their Part A hospital insurance. The premium for Medicare Part B, which covers doctor's visits and medical services, is $104.90 per month for most retirees in 2016 (although some beneficiaries pay more), which can be deducted from your Social Security check so you won't get a bill. Retirees can fill in some of the co-payments and deductibles by purchasing a supplemental plan and get their prescription drugs covered through Medicare Part D.
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