Everybody has the dream of the ideal retired life. Some might think of a holiday and others of sitting at home and enjoying their hard-earned money. The truth is that a financial burden can take away from these dreams. One of the major financial concerns for most retirees is in the form of issues related to taxes. With barely any income, how does one pay their taxes and still have enough for the bills?
There is some good news in this regard. There are plenty of tax breaks for retirees of which you can take advantage. Here are some tax deductions you may not know about that can truly help.
1. Opt for the IRS’s (Internal Revenue Service) elderly credit
If you are aged 65 years and above, you qualify for IRS’s disabled tax or elderly credit. While it is nonrefundable, it can still be used to your advantage. It will take money away from your tax liability, but it would not provide any refund in case you do not have a tax bill. To understand simply, if your credit is higher than your taxes, then do not expect to receive a check reflecting the additional amount. Still, it is worth it. For, though you get no credit, you do not pay anything extra either.
2. Consider freelance or entrepreneur deductions
While this is one of the lesser-known tax breaks for retirees, it can be used to your advantage. You do not need to have a full-time job market to get tax benefits; it would even help if you have a temporary source of earning. Even though you have to pay taxes on any self-employed generated income, you can get a lot of itemized deductions and write off many things as different business expenses.
Some examples of these itemized deductions include:
- Deductions made with regards to retirement plans
- Business equipment such as a computer, office furniture, vehicles used for work purpose
- The cost you pay to professionals, such as inspectors, bookkeepers, attorneys, amongst others
These are a few examples of the kind of itemized deductions. There are many more options, so if you like being busy and have the right skills, you can always consider working from home.
3. Get some leeway on your medical and dental expenses
When you itemize your medical or dental expenses, you can get a sizable tax cut on the money you spend. As of current laws, people who are over the age of 65 years are allowed to deduct any medical cost that is more than 7.5% of their current gross adjusted income. So, if you make about $40,000, you can list out a deduction of $3,000 spent on medical bills. For people who are under the age of 65, the eligible deduction is 10%.
Take advantage of the aforementioned tax breaks for retirees to help save up on your hard-earned money. This can really help you keep up with your retirement expenditures and enjoy your retirement plans to the fullest.