Posted by : Daniel Stoica in (Articles, Federal Taxes, Income Taxes, Individual Tax Credit, Tax Tips) On: August 14th, 2011
Tagged Under : accounting professional, capital gains, Daniel Stoica, deductions, IRS, medical expenses, RMD, Roth IRA, seniors, social security, stocks, Tax, tax professional, winnings
Increased standard deduction
You qualify for a higher deduction if you are 65 years or older or were considered legally blind before the end of the year. You can’t, however, itemize your deductions if you take a standard deduction.
Social security taxes
Your income level determines whether or not you owe taxes on your Social Security. If your Social Security is your only source of income, you will probably not have to pay any taxes or file a tax return. Talk to a tax professional before you decide whether or not to pay taxes on your Social Security.
Required minimum distribution (RMD)
For retired persons who were older than 70 years old in 2009, a new tax law has eased the rules for mandatory minimum IRA withdrawals. Before the new tax law, you had to take a mandatory amount every year. This one-time law allows you to make a withdrawal only if you need it. It was put in place to keep retirees from having to withdrawal money from their IRAs when they don’t need to.
Roth IRA benefits
Roth IRAs are tax-free, which make things financially easier when you have no other income. You have the ability to change from a traditional IRA to a Roth IRA by doing a Roth conversion. You will have to pay taxes for the year you changed to a Roth IRA, but it will be much more helpful for the long-term. Speak to a tax professional to learn more about converting to a Roth IRA.
Some retirees like to gamble at casinos, but they may forget to report their winnings to the IRS, which can get them into trouble. Gambling winnings are considered taxable income and must be reported on your taxes.
The IRS allows for several deductions for your medical expenses if you itemize your deductions. Be aware that you may only claim medical expenses if they are more than 7.5% of your AGI. Record all of your expenses during the year in order to get your maximum deductions.
With the up and down stock market in the last few weeks, millions have lost money, including seniors. You can offset your capital gains if you report your stock losses now. You will also be able to deduct nearly $3,000 in losses and any other losses can be carried over to next year until it’s gone.
Seek professional advice
Tax codes are updated and changed constantly, so it can be difficult to keep up. In order to make sure you are taking every credit and deduction you are entitled to, it would be wise to seek the advice of a tax professional. They will help you fill out and submit your tax return, which will give you the maximum savings you can get.