Everything you need to know about filing taxes as a senior
Once you hit 65 and become eligible for Social Security benefits, taxes can get a lot more complicated. Suddenly you have to worry about income and benefits you never had to before. Don’t worry, it’s not as hard to figure out as it seems.
Social Security Benefits
If you receive Social Security benefits, you may have to pay taxes on some of that income. Exactly how much, however, depends on your total income and marital status.
The good news for low-income taxpayers is that if your total income is less than $25,000 for a single filer or $32,000 for a married couple, you don’t have to pay any federal taxes on your Social Security benefits.
Also, a good rule of thumb to keep in mind is that if Social Security is your only source of income, your Social Security benefits are not taxable and you most likely don’t have to file a return at all.
But if your total income is greater than the relevant threshold above, you will have to pay tax on your Social Security benefits, but first you will have to figure out how much is taxable.
This can be pretty complicated to figure out. If you insist on doing your taxes yourself, you will have to complete several worksheets in IRS Publication 915 [Social Security and Equivalent Railroad Retirement Benefits].
But the easiest way to figure out how much of your Social Security is taxable is to prepare your return with an online tax application, such as the one on PriorTax. Instead of completing a complicated worksheet on an IRS document, all you have to do is fill in your information from your Form SSA-1099 [Social Security Benefit Statement] and other relevant tax documents and the computer’s algorithm will calculate what portion of your benefits are taxable.
Before you get too gloomy about having to pay tax on your Social Security, you should know that there are several special tax benefits available for seniors that you might be able to take advantage of.
First off, everyone age 65 and older gets a larger standard deduction. For 2012 a single filer over age 65 gets $7,400 and a married couple filing jointly with at least one spouse over 65 $13,050. For 2011 the numbers were $7,250 and $12,750 respectively.
Credit for the Elderly or Disabled
You may also be able to take the Credit for the Elderly or Disabled. In order to qualify
- you and/or your spouse must be 65 or older or under 65 but permanently and totally disabled
- your AGI (adjusted gross income) must be less than
- $17,500 for single filers
- $20,000 for married filing jointly, if only one spouse qualifies
- $25,000 for married filing jointly, if both qualify
- $12,500 for married filing separately if you lived apart from your spouse for the entire year
- the nontaxable part of your Social Security or other nontaxable pensions, annuities, or disability income must be less than
- $5,000 for a single filer, head of household, qualifying widow with dependent child, or married couple filing jointly with only one qualifying spouse
- $7,500 for a married couple filing jointly with two qualifying spouses
- $3,750 for a married couple filing separately if they lived apart the whole year
If you find that you can take the credit, you will have to attach Schedule R [Credit for the Elderly and Disabled] to your return.
All of these special tax breaks and rules for seniors don’t have to cause you any extra trouble. File your taxes online with PriorTax and let our tax application take care of it for you. Want to talk to a real live human being? Give one of our tax experts a call and they’ll be happy to walk you through it.
Photo via 401(K) 2012 on Flickr.
Tags: Social Security