8 Things Seniors Should Remember at Tax Time

April 15th is approaching and it is time to begin crossing T’s and dotting I’s in preparation for paying taxes. As tax time draws near, you want to make sure you file all the proper forms and take all deductions you’re entitled to. Following are some things to keep in mind as you prepare your tax form.

brian raphan

  • Gifts. Did you give away any money this year? The gift tax can be very confusing. If you gave away more than $14,000 in 2015, you will have to file a Form 709, the gift tax return. This does not necessarily mean you will owe taxes on the money, however. Click here for more information.
  • Medical Expenses. Many types of medical expenses are tax deductible, from hospital stays to hearing aids. To claim the deduction, your medical expenses have to be more than 10 percent of your adjusted gross income.  (For taxpayers 65 and older, this threshold will be 7.5 percent through 2016.) This includes all out-of-pocket costs for prescriptions (including deductibles and co-pays) and Medicare Part B and Part C and Part D premiums. (Medicare Part B premiums are usually deducted out of your Social Security benefits, so be sure to check your 1099 for the amount.) You can only deduct medical expenses you paid during the year, regardless of when the services were provided, and medical expenses are not deductible if they are reimbursable by insurance. Click here for more information.
  • Parental Deduction. If you are caring for your mother or father, you may be able to claim your parent as a dependent on your income taxes. This would allow you to get an exemption $4,000 (in 2015) for him or her. Click here for more information.
  • Long-Term Care Insurance Premiums. Premiums for “qualified” long-term care policies are treated as an unreimbursed medical expense. Long-term care insurance premiums are deductible for the taxpayer, his or her spouse and other dependents. Click herefor more information.
  • Social Security Benefits. Although Social Security benefits are generally not taxable, people with substantial income in addition to their Social Security may pay taxes on their benefits. If you file a federal tax return as an individual and your “combined income,” including one half of your Social Security benefits and nontaxable interest income is between $25,000 and $34,000, 50 percent of your Social Security benefits will be considered taxable. If your combined income is above $34,000, 85 percent of your Social Security benefits is subject to income tax. Click here for more information.
  • Home Sale Exclusion. Married couples can exclude from income up to $500,000 in profit on the sale of a home ($250,000 for single individuals). If a surviving spouse sells the home, he or she can still claim the exclusion as long as the house was sold no more than two years after the spouse’s death. Click here for more information.
  • Elderly or Disabled Tax Credit. Some low-income elderly or disabled individuals are entitled to a special tax credit. To be eligible, you must meet income limits. For more information, click here.
  • Tax Refunds. Getting a federal tax refund should not affect your Medicaid or Social Security benefits. For a year after recieving a tax refund from the federal government, the refund will not be considered income or resources for SSI or Medicaid purposes. You can also transfer the refund within a year without incurring a penalty. For more information, click here.
The IRS’s Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older. For more information, click here. The IRS also publishes a Tax Guide For Seniors.

Additional Free Guides For Seniors>

Free Tax Help & Filing for Low- and Middle-Income Taxpayers

The United States Internal Revenue Service (IRS) is sponsoring the largest free tax counseling and preparation program in the country, available through AARP.

As seen in: SeniorLiving.about.com
As seen in: SeniorLiving.about.com

Who Can Use this Free Tax Help and Free Filing Service?

Most people who work need to file a tax return. AARP Tax-Aide is a free tax help service for people who meet the following criteria:

  • Low- or middle-income taxpayers who want tax help and free filing of their U.S. federal income tax returns
  • You must have a simple tax return. People seeking tax help who have more complex returns will be advised to get professional tax assistance.
  • You do not need to be a member of AARP or a senior to receive tax help from Tax-Aide, however special attention is paid to people age 60 and over.

What Are the Details of This Free Tax Help and Filing Service?
Every year, from February 1st through April 15th, about 32,000 trained and certified Tax-Aide volunteers across the country are available to provide tax help for preparing and filing your federal tax return.

  • Many Tax-Aide locations are equipped to file your return electronically, allowing you to receive your tax refund much faster.
  • Some Tax-Aide locations offer bilingual assistance.
  • In most situations, you must visit an AARP Tax-Aide site in person to have your tax returns prepared by Tax-Aide volunteers. However, special arrangements can be made to assist shut-ins and homebound disabled persons by providing tax help at locations including hospitals, nursing homes, assisted living facilities, etc. To make a special tax help request, contact AARP at taxaide@aarp.org[/Email”>.
  • Volunteers are not available to provide tax help by phone, so visit the online tax counseling site for a list of frequently asked questions or to submit your own questions.
  • What Do I Need to Bring When I Receive Free Tax Help?
    • Photo identification
    • Social Security card
    • Wage and earning statements
    • Interest and dividend statements
    • A copy of last year’s federal and state returns if available
    • Your bank account and bank routing numbers so you can arrange for direct deposit of your tax refund
  • Where Can I Find the Closest Tax-Aide Site?

    What If There’s No Tax-Aide Site Near Me?
    If you cannot find a Tax-Aide location near you, the IRS offers other tax help options. For more information:

The 10 Most Overlooked Tax Deductions for Care Givers

Thanks to AgingCare.com &  for contributing these often forgotten tips:

Before filing your taxes, don’t miss out on deductions related to medical expenses and other costs that come out of your wallet as you care for a family member throughout the year.

An estimated one-third of U.S. taxpayers, or about 45 million people, itemize their taxes instead of taking IRS’ standard deduction. An estimated $1.26 trillion worth of deductions are claimed annually, according to experts with TurboTax.

See if you can get a break on your taxes, with these 10 tax deductions.

1. Medical expenses

Nearly 100 medical costs can be deducted, related to the diagnosis, treatment, cure or prevention of disease or costs for treating any part of the body. Those include equipment, services and supplies, ranging from glasses to eye surgery to acupuncture to prescriptions.

“Lots of adults are paying for prescriptions for their elderly parents,” says Melissa Labant, a CPA and technical manager for the American Institute of CPAs.

Even artificial limbs, bandages, hearing aids and wigs are accepted medical expenses (for others, see IRS’ Publication 502). The medical and dental costs must total more than 7.5 percent of your adjusted gross income to be deducted.

2. Long-term health care costs

An often-missed expense is the amount paid for long-term care services and long-term care insurance (that’s a more limited deduction, depending on age). Rehabilitation, therapeutic, preventative and personal care services are among those that qualify as long-term care services, if your family member is chronically ill and if it’s part of a plan set by a health care practitioner.

Someone is considered chronically ill if they can’t perform at least two activities of daily living (such as eating, toileting, bathing and dressing) without substantial assistance from someone else.

3. Mileage

From weekly doctor’s appointments to out-of-town visits with a specialist or for a procedure, the miles you log for your parents’ medical needs can be deducted.

“You can take that if they qualify as your dependent. Keep a log as you’re running around,” says Mary Beth Saylor, a CPA and tax principal with Windham Brannon, an Atlanta-based accounting firm. “I’ve hardly seen anybody really keep up with that.” You can take approximately 19 cents a mile for 2012, for medical mileage.If you’re staying overnight for a medical purpose, deduct $50 per night, for each person, for lodging.

4. Dental expenses

Go ahead and smile – dental expenses are among the costs that some people ignore, including dentures and artificial teeth.

5. Home improvements for aging adults

Investing in ramps for a wheelchair-bound parent, handrails and grab bars in the bathroom or a stepless shower can be part of a deduction. It doesn’t matter if the improvements are in your home or your parents’ home, as long as it doesn’t add value to the house, Saylor says.

The IRS says that the cost of the improvement is reduced by the increase in your property value. Other changes, such as widening doorways and hallways, lowering kitchen cabinets and installing lifts, also typically do not add value to houses.

6. Energy-saving home improvements

Whether or not you did this in the course of being a caregiver, any energy-saving changes are eligible for a credit. For more traditional items such as insulation and windows, it’s 10 percent of the cost (a maximum of $500). For alternative energy equipment, like a solar hot water heater, the credit is up to 30 percent of the cost. Find more details from the federal EnergyStar program.(www.energystar.gov)

7. Mortgage interest

If you are paying interest on your or your parents’ home loans, construction loans or home equity lines of credit, it’s deductible. There are some limitations, though, so you need to discuss with your accountant.

8. State and local sales tax

This is an excellent idea if you live in a state that doesn’t have income tax. If you do, you’ll need to make a choice: Deduct state and local sales taxes, or state and local income taxes. You may find that the best financial benefit, in that case, is to stick with the income tax deduction, according to experts with TurboTax. Take some time to figure out your best option by using the IRS sales tax calculator.

9. Estate tax on an inherited IRA

This is not as easy as deducting medical expenses or charitable contributions, but is worth checking out. If you inherited an IRA from your parents, you could take an deduction for the federal estate tax paid on IRA income.

10. Charitable contributions

Of course, you may know to estimate the value of items you or your parents donate to charity. But you also can include other out-of-pocket costs related to volunteering. If you or your parents bought ingredients to make meals for the homeless or elderly, or if you drove a personal vehicle while volunteering or assisting a charity, those and other costs can be deducted.

Tax planning as well as considering other estate planning methods can help you save money. Visit our website. We offer free initial consultation to seniors.

Regards,

Brian A. Raphan

http://www.RaphanLaw.com