06 Apr TOP TAX DEDUCTIONS IF YOU ARE OVER 50
- Home Sale. Often those over 50 have lived in their home a long time resulting in a substantial equity increase. If you have lived in your home for at least two of the five years before you sell your homestead, you can have a capital gain of up to $250,000 if you are single and up to $500,000 if you are married and you file a joint tax return without being subject to capital gains taxes. If you live in Texas and you are widowed and bought your home with your spouse prior to your spouse’s death, then the basis is “stepped up” to the value of the home as of the date of your spouse’s death so you are taxed only on the gain from the date of your spouse’s death. Furthermore, if the surviving spouse sells the home, he or she can still have a gain of up to $500,000 as long as the home isn’t sold more than two years after the spouse’s death.
- Gifts. You can give up to $14,000 per year, per person, without reporting the gift to the IRS and without being subject to gift tax. For example, if you are married and you have a child, then each parent can give $14,000 (a total of $28,000) in a year to the child without reporting the gifts to the IRS. If you give more than $14,000 it doesn’t mean you will be taxed since an individual can give up to $5,490,000 in their lifetime, you just have a duty to report. The person making the gift (not the one receiving it) has the duty to report.
- Medical Expenses. This is the last tax year (2016) that a taxpayer 65 or older can have a deduction for medical expenses over 7.5% of their adjusted gross income. For year 2017 and after, the threshold is 10% (just as it is presently for those under 65) before there can be a deduction for medical expenses. This includes hospital bills, hearing aids, dental expenses, drug costs, long-term care insurance premiums, health insurance premiums, Medicare Parts B, C and D, doctor bills, etc. to the extent they are not reimbursed by insurance.
- Parental Deduction. You might be able to claim your parent as a dependent and get an exemption of $4,050 (for year 2016) if you are caring for your parent.
- Higher Standard Deduction for Some Over 65. If you don’t itemize your deductions and you or your spouse turned 65 on or before January 1, 2017 and you file a joint return, then you might be entitled to an additional standard deduction.
- Social Security Income. Although most receiving Social Security Income are not taxed on such benefits, if you are an individual and a total of ½ of your Social Security benefit and nontaxable interest income is between $25,000 and $34,000 a year, then 50% of your Social Security benefits are taxed and if such total exceeds $34,000, then 85% of your Social Security would be income taxed.